From mansion tax to money ISA modifications: Key takeaways from Reeves’ Budget | EUROtoday

After months of hypothesis and briefings, the chancellor’s Budget has been unveiled within the Commons right now. But in an unprecedented leak simply minutes earlier than Rachel Reeves acquired to her ft, the Office for Budget Responsibility (OBR) printed its response to the assertion, leaking her whole plan earlier than she even had an opportunity to unveil it.

The report exhibits she is going to unveil £26bn price of tax rises at right now’s Budget, leaving her with £22bn in fiscal headroom.

The tax hikes, which come on prime of the £40bn of tax rises unveiled final yr, as set to be delivered by freezing private tax thresholds and a number of smaller measures. It brings the tax take to an all-time excessive of 38 per cent of GDP in 2030-31.

Here are the important thing takeaways from the chancellor’s long-awaited – however much-trailed – funds.

Economic development

The OBR has predicted that financial development will likely be weaker than anticipated from 2026 to the tip of the present Labour authorities, regardless of having elevated its forecast for financial development this yr from 1 per cent to 1.5 per cent.

In 2026, development has been downgraded from 1.9 per cent to 1.4 per cent, in 2027 from 1.8 per cent to 1.5 per cent, in 2028 from 1.7 per cent to 1.5 per cent and in 2029 from 1.8 per cent to 1.5 per cent.

The information will come as a blow to the Labour authorities, which has put financial development on the coronary heart of its mission in workplace.

Inflation and unemployment are additionally set to be greater than anticipated in 2025 and 2026, because the tax burden continues to rise.

Tax rises

A freeze on revenue tax thresholds

Rachel Reeves has introduced that revenue tax thresholds have been frozen for 3 extra years till 2030 -31, a transfer beforehand described as a “stealth” tax rise.

This will drag extra folks into paying the tax for the primary time, and others into paying a better fee as wages rise.

The OBR stated the freeze would lead to 780,000 extra folks paying the basic-rate, 920,000 extra the higher-rate and 4,000 extra additional-rate revenue tax payers in 2029/30, and estimated it’s going to elevate round £7.6bn in 2029/30.

Pension tax raid

Pension contributions made underneath wage sacrifice schemes of greater than £2,000 per yr will now be hit with nationwide insurance coverage contributions from 2029, for each employers and staff, the chancellor introduced.

The transfer is anticipated to lift £4.7 billion in 2029/30 and £2.6 billion in 2030/31. At the second, there is no such thing as a restrict.

Mansion tax

All properties price greater than £2m will likely be slapped with a brand new property tax of round £4,500. According to the OBR, “from April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge which will be additional to existing council tax liability”.

The doc says that there will likely be 4 value bands, ranging from a £2,500 cost for properties price between £2million and £2.5million, and rising to £7,500 for properties price £5million or extra.

Pay-per-mile

Rachel Reeves will announce a mile-based tax for electrical vehicles.

According to the Office for Budget Responsibility’s doc, in 2028-29 the cost will equate to 3p per mile for battery electrical vehicles and 1.5p per mile for plug-in hybrids.

This signifies that the common driver of a battery electrical automotive in 2028-29, driving 8,500 mile,s is anticipated to be charged £255 for that yr, in response to the watchdog.

Sugar tax

Pre-packaged milkshakes and lattes will likely be topic to the sugar tax, because the chancellor and well being secretary ended the exemption for milk-based drinks from the prevailing tax on sugary drinks.

The transfer will have an effect on merchandise resembling packaged milkshakes, coffees and sweetened yoghurt drinks however not drinks made on website in cafes and eating places.

The threshold for levy will even be reduce from 5g/100ml to 4.5g/100ml, hitting dozens extra in style manufacturers, together with Pepsi, Irn Bru and Fanta

Tourist Tax

Local mayors will likely be allowed to impose a “tourist tax” on in a single day stays, the federal government introduced the night time earlier than the funds, as a part of an try to put more cash into England’s cities and areas.

Mayors will likely be given the ability to levy a “modest” cost on guests staying in inns, mattress and breakfasts, visitor homes and vacation lets.

The plans will likely be topic to a session operating till 18 February, which can contemplate points together with whether or not there needs to be a cap on the dimensions of the levy.

Cost of Living measures

Two-child profit cap scrapped

The authorities has determined to raise the two-child profit cap, a measure which the fiscal watchdog says will value £3bn by 2029-30.

After months of backwards and forwards on the problem, and rising strain from Labour backbenchers, the federal government has lastly determined to raise the controversial cap – a transfer the OBR estimates will improve advantages for 560,000 households by a median of £5,310.

National residing wage

The nationwide residing wage has been hiked to £12.71 for staff aged 21 and over – a rise of 4.1 per cent. The authorities stated it will improve gross annual earnings of a full-time employee on the speed by £900. Meanwhile, the National Minimum Wage fee for 18 to 20-year-olds will improve by 8.5 per cent to £10.85 an hour, narrowing the hole with the National Living Wage.

This will imply an annual earnings improve of £1,500 for a full-time employee, which the federal government stated marks additional progress in the direction of its objective of phasing out 18 to twenty wage bands and establishing a single grownup fee.

Transport

The chancellor will lengthen the gas obligation freeze for an additional yr, which the OBR estimates will value £2.4 billion subsequent yr and £0.9 billion within the medium time period.

The tax has been held at 57.95p since 2011, however the efficient fee paid by drivers since 2022 has been 52.95p on account of a “temporary” 5p reduce.

And for the primary time in 30 years, Rachel Reeves has frozen rail fares for one yr – as an alternative of permitting them to rise in keeping with inflation.