The Chancellor announced a new mansion tax affecting homes worth over £2 million and confirmed that the two-child benefit limit will be scrapped.
Rachel Reeves has revealed £26 billion a year in tax rises in a Budget that was leaked moments before its publication. The Chancellor announced a new mansion tax affecting homes worth over £2 million and confirmed that the two-child benefit limit will be scrapped after years of campaigning by anti-poverty groups.
Income tax thresholds will be frozen, affecting over 1.5 million workers. The gambling industry faces new levies, while fuel duty will remain frozen until next year. Reeves described the measures in the House of Commons as “the right choices for a fairer, a stronger and more secure Britain.”
Mansion Tax on High-Value Homes
The Chancellor has introduced a “high value council tax surcharge” for properties worth more than £2 million, expected to affect 100,000–200,000 homes. The charge will range between £2,500 and £7,500 per year, depending on property value. According to the Office for Budget Responsibility (OBR), the surcharge will apply from April 2028 based on 2026 property valuations, with four price bands. The move is expected to raise around £400 million annually for the Treasury.
Abolishing the Two-Child Benefit Limit
In a major policy reversal, the Chancellor has scrapped the two-child benefit limit, which restricted child tax credits and universal credit to the first two children in a family. The limit, introduced in 2017, has been blamed for trapping children in poverty. The government estimates the change will reduce child poverty by 450,000 while costing the Treasury £3 billion by 2029–30. Benefits will also be uprated in line with inflation from April.
Gambling Tax Reforms
- Revenue Target: £1.1 billion by 2029–30.
- Key Measures: Remote gaming duty to rise from 21% to 40% (April 2026). New general betting duty for remote betting at 25% (April 2027). Self-service terminals, spread betting, pool bets, and horseracing excluded. Bingo Duty will be scrapped.
Rail Fare Freeze
For the first time in 30 years, rail fares will be frozen, saving passengers £600 million in 2026/27 across more than a billion journeys. Transport Secretary Heidi Alexander criticized previous fare increases under Conservative ministers, arguing that the private sector profited from unreliable service.
Income Tax Threshold Freeze
Income tax thresholds will be frozen until 2030, meaning more people will move into higher tax brackets as wages rise. The OBR estimates the changes will yield £56 billion by 2030–31, with 780,000 more paying the basic rate, 920,000 the higher rate, and 4,000 the additional rate.
Electric and Hybrid Vehicle Charges
- Start Date: April 2028.
- Charge: Mileage-based, around half the fuel duty rate for petrol drivers.
- Revenue: Expected £1.4 billion for the Treasury.
Energy Bill Reductions
Households will see an average £150 reduction in energy bills from April. Reeves is scrapping the Conservative ECO (Energy Company Obligation) scheme, which cost £1.7 billion annually and failed to reduce fuel poverty for most families. The new measures aim to lower energy costs while maintaining energy security.
Pension and State Support
Millions of pensioners will see their state pension increase by around £550 per year from April, rising in line with average earnings (currently 4.8%). Under the triple lock guarantee, pensions rise based on earnings, inflation, or a minimum of 2.5%, whichever is highest.
Fuel Duty and Worker Pay
- Fuel Duty: 5p cut retained until September 2026, then reversed gradually.
- Pay Hikes: 2.7 million workers to see increases from April.
- Pensions: National Insurance contributions on salary-sacrificed pensions will be applied from April 2029, raising £4.7 billion annually.
National Minimum and Living Wage
- National Living Wage: £12.71/hour for over-21s (annual increase ~£900).
- National Minimum Wage: £10.85/hour for 18–20-year-olds, up 8.5%.
Soft Drinks Levy Expansion
- Sugar Threshold: Reduced from 5g to 4.5g per 100ml.
- Inclusions: Milkshakes and pre-packaged coffees; milk-based drinks exemptions removed.
- Start Date: January 2028.
Cash ISA Limit Changes
- Annual Cash ISA Limit: Reduced to £12,000 from April 2027 for younger savers.
- Overall ISA Limit: Remains £20,000 (cash + stocks & shares).
- Exemptions: Over-65s not affected.
- Tax on Other Savings: Will rise from April 2027.
Hotel and Accommodation Tax
A new £2-per-night tax will apply to overnight stays in hotels and holiday accommodation, including Airbnbs. Local authorities or regional Mayors will decide how the revenue is spent.
NHS Investment
- Funding: £300 million for technology improvements.
- Additional Measures: 250 new neighbourhood health centres by 2030, including Birmingham, Truro, and Southall.
- Goal: Expand community-based services outside hospitals.
Infrastructure Investments
- Projects: Lower Thames Crossing (Essex–Kent tunnel). Midlands Rail Hub and TransPennine Route upgrades. Northern Growth Corridor and Northern Powerhouse Rail commitments.
