What You Need To Know From Rachel Reeves’ Budget

Rachel Reeves’s hotly-anticipated annual Budget has finally been revealed, after weeks of speculation and leaks from government officials.

It means today is the biggest financial occasion of the year where the government unveils its plans for taxes and spending.

The Budget has been a source of major speculation for months, as the government has been scrambling around to try and fill the £20-£30 billion black hole in the public purse.

Then – just 30 minutes before Reeves was due to announce the Budget in the Commons at 12.30pm today – the Office for Budget Responsibility (OBR) accidentally unveiled its reaction to the Budget in a humiliating turn for the government.

Here’s what we know now the government is planning to do with the public finances.

Labour promised said she is getting energy costs down now “and in the future”, by cutting £150 from the average household energy bill from April.

As HuffPost UK revealed in September, the government is lifting the two-child benefit cap, which prevents family from claiming more of universal credit on any children after their second.

The move will be welcomed by most Labour MPs – but may be a tough sell to the public as taxes go up as well.

Scrapping the cap will be funded by increasing taxes paid by the gambling industry. This will cost the Treasury £3bn a year.

She said: “There are many reasons why people choose to have children and then find themselves in difficult times: The death of a partner, ill health, a lost job. I don’t believe children should bear the brunt of that.”

The chancellor hopes to raise around £1 billion by 2031 by increasing taxes on online gambling, while horse-racing and in-person gambling will be exempt.

She is also abolishing Bingo Duty entirely from April 2026.

Reeves will extend the freeze in the salary thresholds at which income tax rates start to apply – a move which would raise between £8 billion to £10 billion for the Treasury.

This is the biggest tax rise within the Budget and often known as a “stealth tax”.

It means workers end up being dragged into a higher tax bracket when they get a pay rise in line with inflation.

The move will also open the chancellor up to criticism as she has previously vowed to end the freeze, which was first introduced by the Tories, and just last year said it raised taxes for working people.

The freeze was meant to end in 2028 but Reeves extended it until 2030/1.

That means 10 million people will end up paying the higher rate by the end of the decade, while everyone receiving full state pension will pay income from 2028.

This will raise £8.3 billion in 2029-30, according to the OBR, and will mean 780,000 more people will pay the basic rate, 920,000 pay the higher rate and 4,000 pay more additional-rate.

Reeves confirmed that that rail fares in England will be frozen next year – the first time in 30 years they were not going up in line with inflation.

The freeze will apply to regulated fares, including season tickets and off-peak returns, until March 2027.

It only applies to services run by England-based train operating companies, but the government said it intends to “directly limit inflation” and hold down a “major component of everyday costs”.

Reeves promised to prolong the freeze in fuel duty first introduced by former Tory chancellor George Osborne over a decade ago.

According to the OBR, she will reinstate the 5p cut in fuel duty – which Rishi Sunak announced in 2022 as the price of oil soared in the wake of Russia’s invasion of Ukraine – until September 2026.

It will then be reversed through a staggered approach.

In total, the decision will cost the Treasury more than £3 billion, partly paid for by charging electric vehicle owners 3p for every mile they drive – working out to around £255 per year, on average.

Critics fear it could discourage people from making the move to electric – but should raise £1.1 billion in its first year rising to £1.9bn the following year.

Reeves intends to use the current council tax system as the basis for a new property tax for large properties.

This would involve revaluing the most valuable homes (those worth over £2 million) across four council tax bands.

The chancellor said: “From 2028, I am introducing the High Value Council Tax Surcharge in England, An annual £2,500 charge for properties worth more than £2m, rising to £7,500 for properties worth more than £5m.

“This will be collected alongside Council Tax, levied on owners and we will consult on options for support or deferral. This new surcharge will raise over £400m by 2031 and will be charged on fewer than the top 1% of properties.”

Milkshakes and lattes will be hit with a sugar tax for the first time ever, having previously been exempt from the levy.

Health secretary Wes Streeting told the Commons before the Budget: “Obesity robs children of the best possible start in life, hits the poorest hardest, sets them up for a lifetime of health problems and costs the NHS billions.

“So, I can announce to the house we’re expanding the soft drinks industry levy to include bottles and cartons of milkshakes, flavoured milk and milk substitute drinks.”

The government will also lower the threshold at which it can apply to 4.5g of sugar per 100ml down from 5g per 100ml.

Brands like Fanta and Irn Bru are expected to be hit.

Reeves said: “From April 2027, I will reform our ISA system keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment with over-65s retaining the full cash allowance.”

That means the amount of money that can be put into an individual savings account (Isa) without paying tax on it will be cut from £20,000 to £12,000 a year – apart from for those over 65.

Every secondary school in England is expected to benefit from a £5 million boost for school libraries – which works to around £1,400 per school.

Labour wants to make sure every child, regardless of their background, would then have access to a wide range of books.

More than 200 play areas are meant to be benefitting from this injection of £18m of cash.

It comes after the government’s Pride in Place programme has offered £5 billion for communities to regenerate public spaces.

The chancellor insisted she would track down unpaid tax, which – along with reforms announced last year – this would raise nearly £10bn a year by 2030.

Millions of low-paid workers are to be given a pay rise as both the national minimum wage and national living wage go up by more than the rate of inflation.

Labour will regularly name and shame employers who breach the national minimum wage rules.

A Treasury source said this is meant to protect vulnerable workers and prevent companies from hiding by hitting them with fines.

Reeves said she was increasing the minimum wage for 18–20 year-olds from £10 to £10.85 per hour and the increasing the living wage from £12.21 to £12.71 per hour.

Pension contributions under salary sacrifice scheme above an annual £2,000 threshold will have to pay national insurance, for both employers and employees.

This will kick in from April 2029, and should raise £4.7 billion in 2029-30 and £2.6 billion in 2030-31 – but may also deter people from saving for retirement.

Reeves said: “I will increase the basic and new state pension by 4.8%, an increase of £575 per year for the new state pension and £440 per year for the basic state pension in line with our commitment to the triple lock.”

The triple lock means increasing the State Pension every year according to the highest of one of three figures: inflation, average earnings growth or 2.5%.

Pensioners living abroad will not have access to the national insurance contributions system either.

Reeves will add a discount for small retail and hospitality premises.

She said: “I will introduce permanently lower tax rates for over 750,000 retail, hospitality and leisure properties – the lowest tax rates since 1991, paid for through higher rates on properties worth £500,000 or more, like the warehouses used by online giants.”

VAT will be slapped on Uber, Bolt and other private hire taxi firms – although it will be a reduced rate usually used for travel agents and tour operators.

Patients will be able to save around £12 million next year as the chancellor intends to extend the freeze on NHS prescription charges.

The cost of a single prescription will remain at £9.90.

Reeves insisted this is proof she is not returning to austerity.

She said: “This Budget will maintain our investment in our economy and our National Health Service. I said I would cut the cost of living, and I meant it.

“This Budget will bring down inflation and provide immediate relief for families. I said that I would cut debt and borrowing, and I meant it.”

She said her Budget means borrowing will fall as a share of GDP in every year of the forecast, and Net Financial Debt will be lower by the end of the forecast than it is today.

Reeves said she had also managed to double the headroom against her stability rule by £21.7 billion, too.

However, the real-life impact on the cost of living remains to be seen – and reactions are still rolling in.