Everything you need to know about Rachel Reeves' second Budget, from tax changes to measures aimed at easing the cost of living crisis

  • Economic growth: The OBR has revised upwards its economic growth projection for this year from 1% to 1.5% but downgraded its predictions for the subsequent four years. Growth forecasts have been cut for 2026 from 1.9% to 1.4%, for 2027 from 1.8% to 1.5%, for 2028 from 1.7% to 1.5% and for 2029 from 1.8% to 1.5%.
  • Fiscal headroom: The Chancellor's headroom against economic turbulence has been expanded through the Budget tax rises, the OBR reports. Ms Reeves declared in the Commons that she would "more than double" the fiscal headroom. The Government's leeway against the Chancellor's day-to-day spending constraint will expand to £22 billion in 2029-30, £12 billion higher than in March, the Budget watchdog confirmed. Going forward, the Chancellor will request the OBR to evaluate whether she is adhering to her fiscal rules annually, during the autumn Budget, rather than biannually.
  • Income tax thresholds: The Chancellor is set to prolong the freeze on income tax thresholds until 2030, a strategy previously labelled as a "stealth" tax increase, but which Ms Reeves characterised as "asking everyone to make a contribution". This will pull more individuals into the tax bracket for the first time, and some into a higher rate, as salaries increase. The OBR stated that the freeze in tax thresholds would result in an additional 780,000 basic-rate, 920,000 higher-rate and 4,000 additional-rate income tax payers by 2029/30, and projected it will generate approximately £7.6 billion in 2029-30.
  • Pensions and salary sacrifices: Ms Reeves plans to restrict the amount of money individuals can contribute to their private pension pot, through a scheme known as a salary sacrifice, before it becomes taxable. Any amount exceeding the new £2,000 cap will be subject to national insurance contributions from 2029, a move estimated to generate £4.7 billion in 2029-30 and £2.6 billion in 2030-31. Currently, there is no limit.
  • Property taxes: A "high-value council tax surcharge" will be implemented on properties valued over £2 million, a so-called "mansion tax". Four price bands will be introduced, escalating 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 adjusted for inflation annually. It is expected to generate £0.4 billion in 2029-30, with all funds going to central Government, rather than local authorities as is typically the case with council tax.
  • Landlords: Ms Reeves also unveiled taxes targeting landlords, informing 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."
  • Business rates: The Chancellor revealed she would bring in "permanently lower" business rates for more than 750,000 retail hospitality and leisure properties.
  • These rates, which Ms Reeves described as the "lowest rates since 1991", will be funded through elevated rates on properties valued above £500,000, including warehouses utilised by "online giants".
  • Electric vehicles tax: Electric vehicle (EV) drivers will face a charge of 3p per mile under fresh taxation introduced by the Chancellor, which is anticipated to increase annually in line with inflation. This measure partly aims to compensate for declining fuel duty revenues as more drivers transition to EVs.
  • Gambling tax: Ms Reeves will raise the levy on remote gaming from 21% to 40% next year, seeking to discourage participation in a gambling format the Chancellor described as linked to the "highest levels of harm". She will also eliminate bingo duty from next April. These measures are projected to generate £1.1 billion by 2029-30.
  • Two-child benefit cap scrapped: The two-child cap is being abolished from April and is anticipated to lift "450,000 children out of poverty", the Chancellor declared. The restriction has barred parents from receiving universal credit or tax credits for beyond their initial two children. It was brought in by the Conservative administration in 2017, and has faced widespread condemnation from Labour MPs and poverty campaign organisations. The policy change is projected to cost £3 billion by 2029-30, according to the OBR.
  • Road and rail: An existing reduction to fuel duty will be extended as a method of keeping petrol prices down at forecourts. The levy has remained at 57.95p since 2011, though the actual rate paid by motorists since 2022 has been 52.95p due to a "temporary" 5p reduction. Railway ticket prices have also been held steady for a year. The Motability programme, which assists disabled individuals with vehicle costs, will no longer provide "luxury vehicles", Ms Reeves announced.
  • Isa changes: The yearly cash Isa threshold will be cut to £12,000. The purpose of lowering the ceiling from £20,000 is to incentivise more individuals to put their money into equities rather than cash. Ms Reeves told the Commons: "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."
  • Energy costs: The Chancellor announced her plans to reduce energy bills and the cost of living, with an average reduction of £150 from the typical household bill starting next year. Ms Reeves stated that she would achieve this by abolishing the ECO (Energy Company Obligation) scheme implemented by the Tories in government, which she alleged had added £1.7 billion annually to households' bills.