From mansion tax to cash ISA changes: Key announcements in Reeves’ Budget

After months of speculation and briefings, the Chancellor’s Budget was unveiled in the House of Commons today. But in an unprecedented leak just minutes before Rachel Reeves stood up, the Office for Budget Responsibility (OBR) published its response to the statement and leaked the full plan before it even had a chance to explain it.

The Chancellor announced tax increases worth £26bn in today’s Budget, leaving him with a £22bn fiscal gap.

The tax increases, which come on top of the £40 billion tax increases announced last year, are planned to be achieved by freezing personal tax thresholds and a series of smaller measures. This puts tax revenue at an all-time high of 38 percent of GDP in 2030-31.

Here are the key takeaways from the Chancellor’s long-awaited but widely followed budget.

economic growth

The OBR has predicted that economic growth will be weaker than expected from 2026 until the end of the current Labor government, although it has raised its forecast for economic growth this year from 1 per cent to 1.5 per cent.

Growth is reduced from 1.9 percent to 1.4 percent in 2026, from 1.8 percent to 1.5 percent in 2027, from 1.7 percent to 1.5 percent in 2028, and from 1.8 percent to 1.5 percent in 2029.

The news will be a blow to the Labor government, which has put economic growth at the heart of its incumbent mission.

tax increases

Freezing income tax thresholds

More than 1.7 million people will face paying more income tax due to freezing thresholds until 2030-31, meaning people will be dragged into paying tax for the first time or will move into higher ranges as earnings rise.

The OBR said the freeze would result in 780,000 more people paying basic tax, 920,000 more higher rate and 4,000 more additional rate income tax payers in 2029/30, and predicted an increase of around £7.6bn in 2029/30.

Ms Reeves acknowledged that freezing tax thresholds would impact the “working people” Labor has promised to protect, but she was “asking everyone to contribute”.

Pension tax raid

The Chancellor has announced that pension contributions made under salary sacrifice schemes of more than £2,000 per year will now be affected by national insurance contributions from 2029 for both employers and employees.

The movement is expected to raise £4.7bn in 2029/30 and £2.6bn in 2030/31. There are currently no limitations.

mansion tax

A new property tax of around £4,500 will apply to all properties valued at more than £2 million. “From April 2028, property owners determined by the Valuation Office to be worth more than £2 million (at 2026 prices) will be liable for a recurring annual charge, which will be in addition to the existing council tax liability,” according to the OBR.

The document states there will be four price ranges, starting from £2,500 for properties valued between £2 million and £2.5 million and rising to £7,500 for properties valued at £5 million or more.

Pay per mile

Rachel Reeves will announce a mileage-based tax for electric cars.

In 2028-29, the charge will equal 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids, according to the Office for Budget Responsibility document.

This means the average battery electric car driver who drives 5,500 miles in 2028-29 is expected to be charged £255 for that year, according to the watchdog.

sugar tax

Pre-packaged milkshakes and lattes will be subject to the sugar tax as the chancellor and health secretary remove the exemption for milk-based drinks from the current tax on sugary drinks.

The move will affect products such as packaged milkshakes, coffee and sweetened yoghurt drinks, but not drinks produced in cafes and restaurants.

The tax threshold will also be reduced from 5g/100ml to 4.5g/100ml, affecting dozens of more popular brands including Pepsi, Irn Bru and Fanta.

Tourist Tax

Local mayors will be allowed to levy a “tourist tax” on overnight stays, the government announced the night before the budget, as part of a bid to pump more money into England’s cities and regions.

Mayors will be given the power to charge a “modest” fee to visitors staying in hotels, B&Bs, B&Bs and holiday homes.

The plans will be subject to a consultation process that will last until February 18 and will consider issues including whether to impose a cap on the amount of tax.

gambling taxes

The Chancellor has announced reforms to gambling taxes to tackle the rise in online gambling; These measures are expected to raise over £1bn a year by 2031.

“Remote Play is associated with the highest level of harm and that is why I am increasing the Remote Play Mandate from 21 per cent to 40 per cent,” Ms Reeves told the Commons.

The tax on online betting will also increase from 15 percent to 25 percent. However, there will be no change to in-person gambling or horse racing taxes, while Bingo Duty will be completely abolished from April 2026.

Taxes on real estate, savings and dividend income increased

Tax rates on property, savings and dividend income will rise by two percentage points, the chancellor said.

He told the House of Commons: “Currently a landlord with an income of £25,000 will pay around £1,200 less in tax than his tenant on the same salary because no National Insurance is charged on property, dividends or savings income.

“It is unfair that the tax system treats different types of income so differently, and that is why I will increase the basic and higher tax rate on property, savings and dividend income by two percentage points, and the additional tax rate on property and savings income by two percentage points.

“Even after these reforms, 90 percent of taxpayers will still pay no tax on their savings.”

Cost of Living measures

Two child benefit limit removed

The government has decided to scrap the two-child benefit cap, which the financial watchdog says will cost £3bn by 2029-30.

After months of back-and-forth on the issue and mounting pressure from Labor supporters, the government has finally decided to scrap the controversial border; The OBR estimates the move will increase benefits for 560,000 families by an average of £5,310.

national living wage

The national living wage for workers aged 21 and over has been increased by 4.1 per cent to £12.71. The government said this would increase a full-time worker’s gross annual earnings by £900 at this rate. Meanwhile, the National Minimum Wage rate for 18 to 20-year-olds will rise by 8.5 per cent to £10.85 per hour, narrowing the gap to the National Living Wage.

This would mean an increase in earnings of £1,500 a year for a full-time worker, and the government said it signals further progress towards its aim of phasing out the 18 to 20 pay band and creating a single adult rate.

Transport

The Chancellor will extend the fuel duty freeze for another year, and the OBR estimates this will cost £2.4bn next year and £0.9bn in the medium term.

The tax has been held at 57.95p since 2011, but the effective rate paid by drivers since 2022 is 52.95p as a result of a “temporary” 5p cut.

And for the first time in 30 years, Rachel Reeves has frozen rail fares for a year rather than allowing them to rise at the same rate as inflation.