Budget 2025: Reeves announces £26bn of tax rises after budget leak

Published

10 hours ago

November 26, 2025

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Rachel Reeves has announced £26bn worth of tax rises in her budget, including extending the freeze on personal income thresholds.

The package contains a new “mansion tax” on properties worth over £2m, while people paying into their pension pot under salary sacrifice schemes will face national insurance on contributions above £2,000.

In a win for Labour MPs, the two-child benefit cap will also be scrapped from April, costing £3bn by 2029/30.

Politics Live: Budget measures leaked

The chancellor also announced:

•New taxes on the gambling industry to raise more than £1bn;
•A new mileage tax for electric vehicles from April 2028;
•The amount you can save in a tax-free cash ISA has been slashed from £20,000 to £12,000 except for over 65s;
•The 5p cut in fuel duty will remain in place until September 2026, when it will be reversed through a staggered approach.

The measures, which were accidentally leaked by the Office for Budget Responsibility (OBR) ahead of time, will take the UK’s tax burden to an all-time high of 38% of GDP in 2030-31, the fiscal watchdog said.

Ms Reeves blamed Brexit and the Tories’ legacy, saying her choices would lead to a “fairer, stronger, more secure Britain”.

But Conservative leader Kemi Badenoch said the budget was “total humiliation” given the chancellor promised that her £40bn tax raising budget last year would be a once-in a parliament event.

What does the freeze on income tax thresholds mean?

The freeze on tax thresholds, introduced by the Conservatives in 2021, was due to end by 2028.

Ms Reeves has extended it for another three years, in a move which will raise an estimated £8bn for the exchequer in 2029-2030 by dragging some 1.7 million people into a higher tax band.

The chancellor previously said she would not freeze thresholds as it would “hurt working people”.

However she was left with a fresh fiscal blackhole of around £30bn after the OBR downgraded its growth forecasts for the UK economy in each year from 2026 to 2029.

The “mansion tax” will raise £0.4bn in 2029-30, while charging national insurance on salary-sacrificed pension contributions, to take effect from 2029, is estimated to raise 4.7bn, the OBR said.

A further £2.1bn will be raised through increasing tax rates on dividends, property and savings income by two percentage points.

Other measures announced today have previously been confirmed by the government, including a “milkshake tax”, a rise in the national minimum wage, the freezing of rail fares and powers for local mayors to impose a tourism tax.

Big spending announcements include free training for apprentices under 25 at small and medium-sized companies, £5m for secondary school libraries and £18m to improve playgrounds in England.

There have also been spending cuts, including a cut to VAT discount for ride-hailing apps like Uber – something critics have branded a “taxi tax”, while a scheme to help disabled people with the cost of a car will no longer offer “luxury vehicles”.

Labour MPs on side – for now

Patrick Hurley, the Labour MP for Southport, told Sky News the package was “much stronger than I was expecting”.

He added: “Very good news on child poverty, gambling taxes and mansion taxes. A lot done, and a lot still to do after 14 years of declining living standards under a succession of dreadful Tory PMs. But I’ve left the Chamber in a much happier mood than when I walked in at 11.30.”

John McDonnell, A veteran left wing MP within Labour’s Socialist Campaign Group (SCG), said removing the two-child cap was a “major win” for colleagues who had pushed for the government to do.

However he said Ms Reeves’ tax increases on wealth don’t go far enough, with the freeze on tax thresholds offsetting other measures aimed at increasing disposable income and resulting in living standards remaining “at a standstill”.

In a message to the SCG he said: “Despite the policy changes we have secured today on child poverty and taxation of wealth it does frustratingly point to the last 18 months being wasted when with our majority we could have done so much more to address the poverty and inequality that scars our community and put money in peoples pockets to drive economic growth.”

In an unprecedented blunder, the full details were published by the OBR around half an hour before Ms Reeves stood up in the Commons chamber.

The fiscal watchdog apologised for what it called a “technical error”, but it comes after a chaotic lead up to the budget which has been rife with leaks and speculation.

Ms Reeves said the measures announced today would “cut NHS waiting lists, cut the cost of living and cut the debt and borrowing”.

Business

Budget 2025: Are you a winner or loser?

Published

1 hour ago

November 26, 2025

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👉 Listen to Sky News Daily on your podcast app 👈

Will you be better or worse off than you were before Chancellor Rachel Reeves announced her tax and spending plans in her long-awaited budget?

From the minimum wage and scrapping of the two-child benefit cap to ISA caps and tax threshold freezes, Niall looks at how the budget will impact you with personal finance expert Iona Bain.

Producers: Tom Gillespie and Araminta Parker
Editor: Wendy Parker

Business

Budget takes UK into uncharted territory to allow spending spree

Published

7 hours ago

November 26, 2025

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Budget takes UK into uncharted territory to allow spending spree

In at least two respects – one expected, the other not – this was a historic budget.

The bit no one expected came just before midday. Normally on budget day, the documents containing all the measures and the official forecasts from the Office for Budget Responsibility (OBR) are published online when the chancellor has finished her speech.

The minute she sits down in the House of Commons, traders, journalists and economists around the country start frantically refreshing their browsers, hoping for first sight of this critical document.

It’s critical because often there is a striking gap between what the chancellor says in her speech and the details inside the document.

Money latest: What the budget means for your money

Take, for instance, one of the chief money-raising measures in this year’s budget: the decision to limit the amount of money people can put into salary sacrifice schemes – something that affects most private sector pensions.

To judge from the chancellor’s speech alone, you might have thought this was a somewhat minor move designed to close a loophole used mostly by wealthy people. But the document shows that, on the contrary, this is a massive tax-raising measure that will bring in a whopping £4.7bn the first year it’s properly instituted.

That is a lot of money – a lot. And whenever the government raises those kinds of sums it invariably means a lot of people will end up paying quite a bit more money in tax. So you see the point: it’s only when you get the final document that you can see the grisly details in black and white.

And those details are more than academic. The contours of the numbers contained in the OBR’s Economic and Fiscal Outlook (EFO) – to give it its proper name – are enormously market-sensitive. They are sometimes the evidence base upon which gilt traders decide whether or not to invest in UK securities.

All of which helps explain why, when the OBR accidentally published its EFO online, nearly an hour before the chancellor stood up to deliver her speech, it caused an extraordinary flurry in markets.

The cost of government debt yo-yoed dramatically as investors hurriedly downloaded the documents and tried to work out what this budget meant for the UK economy.

This was the biggest budget leak in history and doubtless we will hear more in the coming weeks about how it happened and about the consequences. But, as I said at the start, it was not the only historic thing about this budget.

Because it also commits the government to a set of economic policies that take Britain into uncharted territory. The total level of taxation in the UK was already high before this budget – indeed, it was already heading up to the highest level in at least 70 years (actually it’s really the highest level ever – it’s just that the numbers only go back to the 1940s). But this budget supercharges the rise.

As a result of the policies contained in it, as well as the ones in last year’s budget, this parliament is, according to the Institute for Fiscal Studies, heading towards being the biggest tax-raising Parliament in modern history (the numbers in this case only go back to 1970).

Those higher taxes were, the chancellor judged, necessary for two reasons. First, they help her meet her fiscal rules, which in turn means investors begin to charge Britain less to borrow. And the early signs on this were promising: the yield on UK government debt dropped in the hours after that initial OBR-fuelled roller-coaster.

Second, they give her enough money to finance extra spending, much of which is going into extra welfare, in part to fund the abolition of the two child benefit cap. In short, this government is taxing more to spend more.

That raises at least two questions. First, how successful will it actually be in raising those taxes? After all, Britain has never been as highly taxed as it will be at the end of this decade. Will Britons be content to become a high tax economy – like many of our European neighbours – or is the government being too sanguine about what this will mean for growth and, more to the point, its coffers.

Second, having spent much of its first 18 months trying and failing to control welfare spending – forced along the way into U-turns over its plans – can it really be depended on to keep to its expenditure plans off into the future?

The short answer is: no-one really knows. But now that the flurry of excitement over that historic leak is over, this big budget will be thoroughly scrutinised and thoroughly tested in the coming weeks and months.

Business

Budget 2025: The key points at a glance

Published

7 hours ago

November 26, 2025

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Chancellor Rachel Reeves has unveiled the long-anticipated budget.

It comes after a report from the Office for Budget Responsibility (OBR), which analyses policies decided on by the chancellor, was published early in error.

Here are the key points:

Tax thresholds will be frozen for an additional three years from 2028

The point at which people start paying higher rates of tax will be held. It can mean earners will be dragged into higher tax bands when they get a pay rise.

This will raise £8bn.

Taxes hiked on gambling

The gambling industry is going to be taxed more, to raise more than £1bn.

Remote gaming duty will rise to 40% from 21% while online betting tax will rise from 15% to 25%.

The bingo tax is being abolished from April.

New mileage-tax on electric cars

Electric car drivers will be subject to a 3p charge for every mile they drive.

Plug-in hybrid vehicles will be charged 1.5p per-mile.

This is expected to raise £1.4bn, according to the OBR report.

Change to capital gains tax for employee ownership trusts

Capital gains tax relief on business sales made to employee ownership trusts will be reduced from 100% to 50%.

This is expected to raise £900m.

Other tax hikes

The tax paid on dividends – payments to shareholders – as well as property and savings income will rise 2 percentage points, raising £2.1bn.

Two-child benefit cap scrapped

The government will scrap the two-child benefit cap from April 2026.

This currently limits the amount of benefits parents can claim for their third child or subsequent children who were born after 6 April 2017.

By scrapping the cap, the government hopes an estimated 450,000 children will be lifted out of poverty.

According to the OBR’s analysis of the chancellor’s budget this will cost the government £2.3bn.

Salary-sacrifice pension contributions above £2,000 to face national insurance

From April 2029, national insurance will be charged on salary-sacrificed pension contributions above an annual £2,000 threshold.

This will raise £4.7bn and will come into effect in 2029.

State pension increases

There’ll be an increase of £440 per year for the basic state pension and an increase of £575 per year for the new state pension.

Reforms for cash ISAs

Savers will only be able to put up to £12,000 into cash ISAs tax-free each year. This is reduced from £20,000 in the hopes that Britons will instead put their money into stocks and shares ISAs.

Over 65s can retain the full £20,000 allowance.

Fuel duty to be frozen until next September

The duty, or tax, paid on diesel and petrol has been frozen at 52.95p per litre.

This will cost the government £2.4bn next year and £900m each year after.

Mansion tax introduced on properties worth more than £2m

It means the most expensive properties in the country, worth more than £2m, will have to pay extra. This will be £2,500 for properties worth £2m to £2.5m and up to £7,500 for homes valued at £5m.

This will raise £400m, the OBR has confirmed.

Cut in energy bills

The average annual energy bill will be cut £150 from April by reducing levies.

The Energy Company Obligation (ECO) scheme, which is designed to tackle fuel poverty and help reduce carbon emissions, will be scrapped.

Luxury cars removed from the Motability scheme

This scheme, which provides subsidies for people with a disability to lease a vehicle, is part of PIP.

Freeze on student loan repayment rate

The student loan repayment threshold will be maintained for three years.

Training for apprentices under-25 free at small companies

A new Youth Guarantee will give £820m towards tyring to guarantee every young person a place in college, an apprenticeship or personalised job support.

After 18 months, 18-to-21 year-olds will be offered paid work instead of benefits.

Wider inheritance tax rules

A change to inheritance tax will allow the transfer of 100% relief allowance between spouses.

Uber and Bolt journeys to be taxed

Journeys taken on ride-hailing apps such as Uber and Bolt will be subject to tax in a measure being described as a taxi tax.

Rail fares frozen

Rail fares will be frozen for the first time in 30 years, with passengers not paying any more for season tickets, peak return and off-peak return tickets between major cities.

Business rate changes

Business rates will be reduced for 750,000 retail, hospitality and leisure properties, which will be funded by an increase on premises worth more than £500,000.

The tax reduction will be paid for by an increase in taxes on properties worth £500,000 or more, like the warehouses used by online giants.

Stamp duty break for companies new to London Stock Exchange

A stamp duty holiday for companies newly listing on the London Stock Exchange will be in place for three years.

OBR forecast

Next year, economic growth is expected to be lower than the OBR thought in March. GDP will be 1.4% in 2026, down from a previously anticipated 1.9%.

It will be 1.5% for the rest of the decade.

According to the independent forecasters, prices are expected to rise faster than the OBR thought in March due to higher wages and food costs.

Inflation will be 3.5% this year and 2.5% next.

The amount of fiscal headroom the chancellor has doubled to £22bn in 2029-30. This means a £22bn financial cushion against price shocks such as the COVID-19 pandemic and soaring energy costs.