The 2025 Autumn Budget increased taxes by around £26 billion, according to analysis by the Office for Budget Responsibility (OBR), bringing the tax take to an all-time high of 38% of GDP in 2030/31.
Chancellor Rachel Reeves announced a slew of tax hikes and other measures, impacting taxpayers in the country.
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What taxes were raised in the Budget?
The Budget will mean that a lot of Brits will pay more tax to the government as the years go on, largely thanks to the extension of the freeze to income tax thresholds.
But that’s not the only way that the chancellor is hoping to find cash.
Tax threshold freeze
The chancellor has extended the freeze on income tax thresholds by three years, meaning they will not increase in line with inflation until at least 2031.
This means that as workers’ earnings increase, more of their money will be dragged into higher income tax bands, leading to a higher tax bill.
This process is called fiscal drag and is expected to raise around £8.3 billion in 2029/30 according to the OBR.
Thresholds were already frozen by the previous Conservative government until the 2027/28 tax year, Reeves’s extension will mean workers won’t see tax bands increase with inflation until at least April 2031.
Crackdown on salary sacrificed pension contributions
Pension savers using salary sacrifice to boost their retirement pots will need to pay National Insurance on contributions above £2,000 from April 2029 onwards, the chancellor revealed.
It means all salary-sacrificed pension contributions over £2,000 will be treated in the same way as ordinary employee pension contributions, becoming subject to both employer and employee National Insurance contributions.
The policy is forecast to raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31.
Tax hike for property, savings, and dividend income
Brits who earn an income from their savings interest, dividends, or property will become subject to a two percentage point tax hike from April 2026 onwards.
From 2026-27, tax on dividends will rise to 10.75% for basic rate taxpayers, and 35.75% for higher rate taxpayers. The tax on additional rate taxpayers will not change – remaining at 39.35%. The OBR estimates this to raise £1.2 billion a year on average from 2027-28.
From April 2027, the amount you are taxed on your savings interest income will increase to 22% for basic rate taxpayers, 42% for higher rate payers, and 47% for additional rate payers. This is estimated to bring in £0.5 billion a year on average from 2028-29.
Finally, people who earn property income will also see a two percentage point increase in how much they are taxed, rising to 22% for basic rate taxpayers, 42% for higher rate payers, and 47% for additional rate payers. This is estimated to yield £0.5 billion a year on average from 2028-29.
New per mile electric vehicle tax
Drivers of electric vehicles (EVs) will be subject to a new tax from April 2028 onwards, bringing their tax burden closer in line with that of petrol and diesel vehicle drivers.
EV drivers will have to pay a new charge of 3p per mile driven for fully electric vehicles, and 1.5p for plug-in hybrid vehicles. The rate will increase annually in line with inflation, as measured by the consumer price index (CPI).
The average driver of a battery car, driving 8,500 miles can expect to be charged around £255 a year. This is roughly half the rate of fuel duty paid per mile for petrol and diesel vehicles.
The OBR estimates the new levy will raise £1.1 billion in 2028-29, rising to £1.9 billion in 2030-31.
‘Mansion tax’
A new council tax surcharge that targets properties valued over £2 million was announced in the Budget, costing homeowners between £2,500 and £7,500 a year depending on the value of their home.
Dubbed a ‘mansion tax’, the measure is expected to raise £0.4 billion in 2029-30 and will be in force from April 2028.
Cash ISA cut
While not technically a tax hike, the chancellor announced she will cut the amount under-65s can save in a cash ISA each year.
From April 2027, the cash ISA limit will be £12,000 per tax year. To take advantage of the full £20,000 allowance, savers will have to put the rest into stocks and shares.
Older savers will be spared this new restriction, however. Over 65s will see no change and keep the full £20,000 cash allowance.
Fuel duty to be frozen until September, then increase
Fuel duty will be frozen again for the 16th year in a row, until April 2026.
From April 2026 onwards, the 5p cut to fuel duty introduced by Rishi Sunak in 2022 will be reversed through a staggered approach. From April 2027, fuel duty rates will then be increased annually in line with RPI.
Gambling tax reform
The government is set to raise £1.1 billion by 2029/30 through several changes to gambling duties.
From April 2026 the remote gambling duty will rise from 21% to 40% and from April 2027 a new rate for general betting duty for remote betting will be introduced at 25%. Casino gaming duty bands will also be frozen in 2026/27.
What other policies were announced?
Two-child benefit cap scrapped
The two-child benefit cap was removed in the Budget, at an expected cost of around £3 billion, according to the OBR.
Removing the policy, which means parents can only claim Universal Credit or tax credits for their first two children, is forecast by the IFS to take 630,000 children out of absolute poverty immediately.
Energy bills to be cut by £150
Energy bills will be cut by an average of £150 from April 2026 onwards, the chancellor has said.
The savings will be made by removing the previous government’s “Eco scheme”, a levy placed on energy bills to fund green initiatives.
Electric vehicle grant extension
Offsetting some of the pain caused by the new 3p per mile levy on electric vehicles, the UK’s electric car grant is set to be extended until 2030.
The grant currently subsidises the price of a new EV by between £1,500 and £3,750 depending on the model.
Minimum wage to rise
The minimum wage has been increased, boosting the paychecks of around 2.4 million low-paid workers.
From April 2026, the national living wage will rise by 4.1% to £12.71 per hour for workers over 21.
The national minimum wage will rise by 8.5% to £10.85 per hour for workers between 18 and 20, and by 6% to £8 per hour for apprentices aged between 16 and 17.
Rail fare freeze
The government has confirmed all regulated rail fares, including season tickets, peak returns, and off–peak returns, will remain at their current level.
The Treasury estimates a rail fare freeze will save commuters on more expensive routes over £300 a year, assuming they commute three days a week. Without a freeze, rail fares were set to increase by 5.8% in 2026.
State pension set to rise
Retirees on the full new state pension are set to receive an extra £550 a year, £120 more than if it had been uprated by inflation.
The uplift comes thanks to the triple lock which guarantees the state pension will rise by the highest of three metrics: inflation, earnings growth, or 2.5%.
Class 2 National Insurance contributions abolished for people living abroad
The government is removing access to the cheapest Class 2 Voluntary National Insurance contributions (VNICs) for individuals living abroad and increasing the initial residency or contributions requirement for VNICs to 10 years.
It means that people who lived in the UK for just a brief period of time will no longer be able to effectively buy themselves a UK state pension.
Prescriptions will be kept under £10
The chancellor announced the freeze on NHS prescription charges in England will continue into 2026, meaning the cost of a single prescription will be kept at £9.90.
The Treasury says the policy will save patients around £12 million next year.
Help to Save to be made permanent
The Help to Save scheme, which boosts the savings of 4.5 million low earners by 50%, will be made permanent from 2028.
The scheme allows eligible savers to get a £1,200 government bonus – a 50% boost on the maximum amount they can save – over four years, helping those on low incomes build a financial buffer. It was supposed to end in 2027.
Student loan support for care leavers
All care leavers will be entitled to student maintenance loans of up to £13,500 each academic year, the maximum loan amount available, no matter their financial situation.
New neighbourhood health centres
The government will open 250 new ‘Neighbourhood Health Centres’, local buildings that bring together GPs, nurses, dentists and pharmacists together under one roof.
New centres will be first built in the most deprived areas in a bid to improve healthcare access and drive down NHS waiting lists.
NHS technology upgrades
The chancellor announced £300 million of new capital investment that will go into supporting and developing NHS technology.
The government hopes the investment will boost productivity and lower the amount of time NHS workers spend on administrative tasks.
Playground makeovers
200 playgrounds across England will receive a combined £18 million for government-funded makeovers to encourage children to play outside and boost their health and wellbeing.
Boost to school libraries
All secondary schools in England will receive around £1,400 to refresh their libraries, at a total cost to the Treasury of £5 million. It’s hoped the move will incentivise children to read books instead of looking at their phones.
Hundreds more planners to be hired
The government is set to employ 350 more planners (at a cost of £48 million) to help support the government’s commitment to build 1.5 million homes before the next parliament. Savills currently estimates the government will fall short of the building target.
Benefit fraud crackdown
The chancellor expects to claw back £1.2 billion from incorrect Universal Credit (UC) payments by extending the government’s Targeted Case Review, which roots out inaccuracies in UC claims.
The expected savings from the scheme are forecast by the Treasury to be £9.6 billion by 2031.
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