Ms Reeves also announced a series of measures aimed at helping people who are currently struggling with living costs, including a long-expected end to the two-child limit on benefits.
The Chancellor was gazumped in laying out her Budget by the unexpected early publication of the Office for Budget Responsibility (OBR) analysis of her plans.
Here are the main tax rises and cost-of-living measures the Chancellor announced at the Budget on Wednesday.
1. Income tax threshold freeze ‘a stealth tax’
The Chancellor will extend the freeze on income tax thresholds until 2030, a move previously described as a “stealth” tax rise, but which Ms Reeves billed as “asking everyone to make a contribution”.
This will drag more people into paying the tax for the first time, and others into paying a higher rate, as wages rise.
The OBR said the freeze in tax thresholds would result in 780,000 more basic-rate, 920,000 more higher-rate and 4,000 more additional-rate income tax payers in 2029/30, and estimated it will raise about £7.6 billion in 2029-30.
This has been billed as stealth tax by many, including Martin Lewis, who says: “Fiscal drag remains. Its a stealth tax. Freezing thresholds while average earnings rise mean people pay a bigger proportion of their income in tax.”
“I will maintain all income tax and national insurance thresholds for a further three years from 2028”.
Translation. Fiscal drag remains. Its a stealth tax. Freezing thresholds while average earnings rise mean people pay a bigger proportion of their income in tax. #Budget2026
— Martin Lewis (@MartinSLewis) November 26, 2025
Greg Marsh, household finance expert and CEO of smart money-saving tool Nous.co agrees: “The Chancellor’s decision to extend stealth taxes for another three years is a huge blow for working people.
“A typical household will be £267 worse off next year alone because of frozen thresholds – and for two earners on £70,000, the hit is closer to £800.
“Despite Labour’s promises not to increase taxes for working people, that’s exactly what they (and the previous Government) have been doing.
“People are being left with a larger tax bill – it’s just being done in a sneaky and backhanded way. The fact that this is obscure and hard to understand is precisely what makes this such an effective tax grab.”
2. Pensions and salary sacrifices
Ms Reeves will limit the amount of money people can put into their private pension pot, through a scheme called a salary sacrifice, before it incurs tax.
Anything above the new £2,000 cap will incur national insurance contributions from 2029, a move which has been estimated to raise £4.7 billion in 2029-30 and £2.6 billion in 2030-31. At the moment there is no limit.
Frank Smith, Managing Director of Frank Smith & Co. Solicitors says: “This will have immediate and tangible implications for families, high earners, business owners and trustees of pension schemes. Furthermore, we can expect to see a direct impact on succession planning, estate management, and property holdings.
“It is now a pivotal moment for individuals to reassess arrangements: whether drawing on pension benefits, structuring contributions, or aligning retirement planning with estate and tax planning strategies. For businesses too, we will no doubt see an increased demand for intergenerational wealth transfer, making early engagement with clients especially important.”
3. Two-child benefit cap scrapped
The two-child cap is being scrapped from April and is expected to lift “450,000 children out of poverty”, the Chancellor said.
The cap has prevented parents from claiming universal credit or tax credits for more than their first two children. It was introduced by the Conservative government in 2017, and has been widely criticised by Labour MPs and anti-poverty advocacy groups.
The move is estimated to cost £3 billion by 2029-30, according to the OBR.
Mark Rowland, Chief Executive at the Mental Health Foundation, says: “In removing the two-child benefit limit, the government has taken one of the most important steps it could for improving the mental health of the next generation, and their parents.
“Experiencing poverty, especially from a young age, is one of the key factors behind poor mental health. The two-child limit policy has penalised millions of families, added to financial hardship, and contributed to an unacceptable legacy of 4.5 million children growing up in poverty. For many of those children and their families, today’s decision to abolish the cap will be life-changing and reduces a significant barrier to good mental health.
“Our own research shows that even a small increase in income for families has real and quantifiable positive effects on their mental health. This is a change that the Mental Health Foundation has long called for, and it could not be more welcome.”
4. Travel costs – 5p freeze to remain to help drivers
A cut to fuel duty will be extended as a means of holding down the price of petrol at the pump, which many drivers are celebrating.
The tax has been held at 57.95p since 2011, but the effective rate paid by drivers since 2022 has been 52.95p as a result of a “temporary” 5p cut.
Rail fares have also been frozen for a year.
The Motability scheme, which helps disabled people with the cost of a car, will meanwhile no longer offer “luxury vehicles”, Ms Reeves said.
5. Cash ISA limits cut for under 65s
The annual cash Isa limit will be reduced to £12,000. The aim of reducing the limit from £20,000 is to encourage more people to invest their money in stocks and shares instead.
“Someone who has invested £1,000 a year in an average stocks and shares Isa every year since 1999 would be £50,000 better off today… than if they’d put the same money into a cash Isa,” Ms Reeves told the Commons.
6. Energy bills: £150 cut to average bills
The Chancellor said she was taking action to get energy bills down and cut the cost of living, with an average of £150 cut from the average household bill from next year.
Ms Reeves said she would do this by scrapping the ECO (Energy Company Obligation) scheme introduced by the Tories in government, which she claimed had cost households £1.7 billion a year on their bills.
Simon Francis, coordinator of the End Fuel Poverty Coalition , says: “Any reduction in energy bills will be welcome as households face their fifth winter of the energy costs crisis and the Government is right to be investing in the Warm Homes Plan to help improve the energy efficiency of peoples’ homes.
“But no one can warm their home with Budget headlines, and the Chancellor’s statement also highlights the scale of the challenge.
“Even with the changes announced, we expect that from April 2026, average energy bills will still be hundreds of pounds higher than they were in winter 2020/2021 and £97 higher than at the General Election.
“The millions of households who will still be struggling with the cost of energy need further bold action from the Government in reform of energy pricing, targeting energy bill support at those who need it, delivering on a new fuel poverty strategy and in creating an ambitious Warm Homes Plan to upgrade cold, damp homes.”
7. Property taxes: Mansion tax and landlords targeted
A “high-value council tax surcharge” will be introduced on properties worth more than £2 million, a so-called “mansion tax”.
Four price bands will be introduced, rising from £2,500 for a property valued between £2 million to £2.5 million, to £7,500 for a property valued at £5 million or more, all uprated by inflation each year.
New High Value Council Tax Surcharge (ENGLAND ONLY) from April 2028 will be…
£2m to £2.5m: £2,500/yr
£2.5m to £3.5m: £3,500/yr
£3.5m to £5m: £5,000/yr
£5m+: £7,500/yr— Martin Lewis (@MartinSLewis) November 26, 2025
It will raise £0.4 billion in 2029-30, with all money going to central Government, rather than local authorities as usually happens with council tax.
Ms Reeves also announced taxes targeted at landlords, telling the Commons: “It’s not fair that the tax system treats different types of income so differently, and so I will increase the basic and higher rate of tax on property savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points.”
Sanjay Joshi, Director at Lawsons & Daughters, a London estate agent, says: “With so little in the Autumn Budget to stimulate the housing market, the uncertainty that’s been holding things back is likely to persist. Aside from the newly revealed council tax surcharge on £2m+ homes, there’s nothing here to boost confidence or give the market direction.
“There’s plenty of headline noise, but not enough clarity to genuinely reassure the wider market – especially buyers and sellers at the lower end of the scale, where confidence has been most fragile.
“Similarly, landlords remain unsettled too. Many are already planning to sell up, with new legislation coming in 2026, and the increase in tax rates on income from property will only fuel that sentiment.”
Richard Owen, director of Cinch storage, says: “Whilst Rachel Reeves has stated ‘working people deserve change’, from what we can see it is still working people who are being squeezed by this budget.
“The UK housing market is incredibly important for so many sectors and we’re waiting to hear what the catalyst will be to kick start growth again.”
8. Pensioners to see 4.8% increase in State Pension
The Chancellor confirmed that the state pension will rise 4.8 per cent for the 2026/27 financial year, as determined by the triple lock mechanism.
The full new state pension will increase by about £570 a year, she said – for people who reached the state pension age after April 6 2016. Those who retired before then on the full basic state pension will get a lower increase.
“I will ensure state pensioners do not have to pay tax on small amounts through simple assessment.” Not sure what this means in practice, will be finding out, does it mean they won’t pay tax, or they wont do it via assessment. #Budget2026
— Martin Lewis (@MartinSLewis) November 26, 2025
Lucie Spencer, Partner in Financial Planning at wealth management firm Evelyn Partners, comments: “The triple lock headlines disguise a wide range of circumstances for today’s pensioners. For a start, only one in three (36%, or 4.7million) pensioners get the full new state pension.
“The reality is that pensioners receive not ‘the state pension’ but a dizzying array of different payouts depending on when they reached state pension age, whether they had opted out of the old system, and whether they had accumulated enough National Insurance Contributions (35 years contributions if you retire after 6th April 2016), to name just a few of the variables.”
9. Business taxes: “permanently lower”
The Chancellor said she would introduce “permanently lower” business rates for more than 750,000 retail hospitality and leisure properties.
The rates, which Ms Reeves said would be the “lowest rates since 1991”, will be paid for through higher rates on properties worth more than £500,000, including the warehouses used by “online giants”.
10. Electric vehicles tax
Drivers of electric vehicles (EVs) will have to pay 3p per mile under a new tax introduced by the Chancellor, which is expected to rise annually with inflation.
The move is in part to make up for falling revenues from fuel duty, as more motorists move towards EVs.
11. Gambling tax: “highest levels of harm”.
Ms Reeves will increase the levy on remote gaming from 21% to 40% next year, in a bid to deter people from a form of gambling, the Chancellor said, was associated with the “highest levels of harm”.
She will also abolish bingo duty from next April.
These steps are estimated to raise £1.1 billion by 2029-30.
Winners and losers: who has done well from the budget 2025?
“There are some clear winners in this Budget,” says Greg Marsh, household finance expert and CEO of smart money-saving tool Nous.co .
“The rise in the National Living Wage to £12.71 will leave a full-time worker around £900 a year better off, and younger workers aged 18 to 20 will see a bigger boost worth about £1,500. Pensioners also benefit from a 4.8% state pension rise worth around £550 a year.”
Those earning around £50,000 may see themselves will be dragged into paying the higher rate of tax with their next pay rise. These are higher earners, but they are certainly not the very rich – experienced nurses, police sergeants and senior teachers all fall into this bracket.
A household with two people on £50,000 who each receive a small pay increase will end up paying more than £600 extra in tax next year alone.
