Rachel Reeves has set out details of her second Budget since becoming chancellor on 26/11/2025.
A number of measures from the yearly tax and spending plan had already been announced in the days leading up to the statement.
Other measures were revealed by accident after the UK’s budgetary watchdog mistakenly published its official forecast early.
Here is a summary of the main points:
Personal taxation
- Income tax and National Insurance (NI) thresholds frozen for a further three years beyond 2028 to 2031
- Making Tax Digital for Income Tax starts in April 2026 . There will be no late submission penalties for quarterly updates during the 2026/27 tax year.
- No increase in the rate of VAT
- Amount under-65s can put into cash Isas (Individual Savings Accounts) capped at £12,000 a year from April 2027, with the rest of the £20,000 annual allowance reserved for investments
- The basic and higher rates of dividends tax is rising by 2% to 10.75% and 35.75% respectively from April 2026
- Inheritance tax threshold frozen until 2030/31
- Abolish access to voluntary Class 2 NICs for people living abroad
- Tax on savings income will increase by 2% across all bands from April 2027
- Student loan repayment threshold frozen at the 2026/27 level for three years
- From April 2027, the £20,000 ISA annual limit is kept, but £8,000 must be in investment (but over 65s not affected)
- New separate tax rates for property income, so property income will have its own individual tax rates. From April 2027, the property basic rate will be 22%, higher rate 42% and additional rate 47%. Finance cost relief will be provided at the separate property basic rate (22%).
- Two-child benefit cap lifted from April 2026
Wages, benefits and pensions
- Cap limiting households on universal or child tax credit from receiving payments for a third or subsequent child to be scrapped from April
- Legal minimum wage for over-21s to rise 4.1% in April, from £12.21 to £12.71 per hour, with the wage for 18 to 20-year-olds rising from £10 to £10.85
- Basic and new state pension payments to go up by 4.8% from April, more than the current rate of inflation, under the “triple lock” policy
- Amount people can “sacrifice” from their salary – thereby avoiding NI on pension contributions – capped at £2,000 a year from 2029
- Help to Save scheme, which offers people on universal credit a bonus on savings, extended and expanded beyond 2027
- Pension pots to be brought into IHT from April 2027
- Payrolling of benefits in kind from April 2027
- Pensions: no change to the 25% tax-free lump sum or relief for contributions (but see salary sacrificed pensions)
- Salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance from April 2029. Contributions above the threshold will be subject to both employer and employee NICs, 15% and 8% respectively for earnings under £50,270 and 2p on income above that level
Housing and Properties
- Properties in England worth more than £2m to face a council tax surcharge of £2,500 to £7,500, following a revaluation of homes in bands F, G and H
- Tax charged on rental income increased by 2 percentage points, from April 2027
Transport
- 5p “temporary” cut in fuel duty on petrol and diesel extended again, until September 2026, before it rises again over six month period
- A new mileage-based tax for electric vehicles and plug-in hybrid cars to be introduced from 2028
- Regulated rail fares for journeys in England frozen next year for the first time since 1996 (there have been periods when prices rose by less than inflation)
- Premium cars to be excluded from Motability scheme, which allows people on certain disability benefits to lease vehicles more cheaply
Business Taxes
- Corporation Tax capped at 25% for duration of parliament
- Thresholds for NI paid by employers also frozen until 2031, increasing costs as wages rise over time
- Tax exemption for small packages from overseas retailers worth under £135 scrapped from 2029, following complaints it hinders UK businesses
- Remote gaming duty, paid on online casino betting, to rise from 21 to 40% from April 2026
- General betting duty, paid on sports betting, to rise from 15 to 25% online from April 2027, with an exemption for horse racing
- Annual Investment Allowance (AIA): Up to £1 million for plant and machinery at 100% (unchanged and still available).
- CGT Business Asset Disposal Relief rate rise from 14% to 18% from April 2026
- From April 2026, the main rate of writing down allowances will reduce by 4% to 14%. From 1 January 2026, there will be a new first-year allowance of 40% for main‑rate assets, preserving incentives to invest. Cars, second-hand assets and assets for leasing overseas will not be eligible.
- Reduced CGT relief on disposals to employee ownership trusts
- Permanently lower business rates for hospitality premises paid for by warehouses of online companies
- Importações de baixo valor para o Reino Unido. O benefício fiscal para compras de até £135 será abolido a partir de março de 2029
- Small and medium-sized enterprises will continue to benefit from the existing exemption from transfer pricing.
Household Bills
- Green levies taken off energy bills and paid through general taxation, in a move the Treasury says will save households £88 a year
- It says a further £59 saving will be made by scrapping a customer-funded scheme helping low-income households insulate their homes
Drinking and smoking
- Tax on sugary drinks extended to pre-packaged milkshakes and lattes from 2028, reversing an exemption when the tax was introduced in 2018
- Tax on tobacco to increase by 2% above the higher RPI rate of inflation
- Tax on alcohol, including draught drinks, will also increase by the higher RPI measure in February
UK growth , inflation and debt
- Office for Budget Responsibility (OBR) predicts the UK economy will grow by 1.5% this year, upgraded from a 1% forecast in March
- But the economy is now forecast to grow by 1.5% on average between 2026 and 2029, down from the previous estimate of 1.8%
- Inflation predicted to average 3.5% this year, before falling to 2.5% next year, and returning to the government’s 2% target in 2027
Other measures
- English regional mayors to be given powers to tax overnight stays in hotels and holiday lets, echoing existing plans in Scotland and Wales
- Training for apprentices under-25 will be made free for small and medium-sized companies
- Any 18 to 21-year-olds on Universal Credit not earning or learning for more than 18 months will be offered six-month paid work placements, and those not taking up the offer face being stripped of their benefits
- Planned tax on English universities’ tuition income from overseas students will be charged at £925 per student per year, from August 2028
- Cost of a single NHS prescription in England frozen at £9.90 for another year (they remain free in Wales, Scotland and Northern Ireland)
- £5m will be dedicated to secondary school libraries and another £18m for improving and upgrading playgrounds across England
- Infected blood compensation will be made exempt from inheritance tax
- Greater resources to crack down on tax and benefits fraud
- More funds for devolved governments
- More sanctions on Russian assets
- National debt will rise to above £3 trillion for the first time.
- Rail fares frozen
- £150 average cut off energy bills from April 2026 (removing green levies)
- A new tourist tax on overnight stays
- Fuel duty frozen until September 2026 followed by staged increases. Temporary 5p cut also retained until September
- New settlement opportunity on the long-running loan charge
- Welfare spending will be £16bn higher by 2029/30 in the wake of the Budget, the OBR has forecast