Chancellor Rachel Reeves has delivered the long-awaited Budget, following the early publication of the Office for Budget Responsibility’s (OBR) report. The budget outlines significant fiscal changes aimed at stabilising public finances, supporting vulnerable households, and reshaping taxation and welfare policies over the coming years.

Below is a clear summary of the Budget’s major announcements.

1. Taxation

Tax thresholds frozen until 2028

Income tax thresholds will remain fixed for an additional three years.
This means that as wages increase, more people may move into higher tax bands over time.
The measure is expected to raise £8bn.

Increases to dividend, property and savings income tax

Taxes paid on dividends and secondary income streams will rise by 2 percentage points, raising £2.1bn.

Higher taxes on gambling

• Remote gaming duty increases from 21% to 40%

• Online betting tax rises from 15% to 25%

• Bingo tax abolished from April

These changes are expected to raise over £1bn.

Mileage tax for electric vehicles

From April 2028:

• Fully electric cars: 3p per mile

• Plug-in hybrids: 1.5p per mile
  This is projected to raise £1.4bn.

Capital gains tax change for employee ownership trusts

Relief is reduced from 100% to 50%, expected to raise £900m.

2. Welfare & Household Support

Two-child benefit cap scrapped (from April 2026)

This major reform removes the limit that prevents parents from claiming benefits for a third or subsequent child born after April 2017.
The government expects around 450,000 children to be lifted out of poverty.
Cost: £2.3bn.

State pension increases

• +£440 per year for the basic state pension

• +£575 per year for the new state pension

Student loan repayment threshold frozen

The repayment threshold will remain unchanged for three years.

Youth Guarantee

A new £820m initiative guaranteeing all young people access to:

• College

• An apprenticeship

• Or personalised job support

After 18 months, 18–21 year-olds will be offered paid work instead of benefits.

Books for school libraries

£5m will be allocated to secondary schools to increase book provision.

3. Cost of Living & Everyday Expenses

Average £150 cut to annual energy bills

Achieved by removing several levies, including the Energy Company Obligation (ECO).

Fuel duty frozen until September

Petrol and diesel duty remains at 52.95p per litre.

Rail fares frozen

The first freeze in 30 years, covering:

• Season tickets

• Peak return fares

• Off-peak fares between major cities

Prescription charges frozen

NHS prescriptions in England remain at £9.90.

4. Housing, Property & Transport

Mansion tax introduced

Applies to homes worth over £2m:

• £2,500 for properties valued £2m–£2.5m

• Up to £7,500 for homes worth £5m

DLR extension confirmed

The Docklands Light Railway will be extended to Thamesmead, supporting long-term growth in southeast London.

Business rate changes

• Reductions for 750,000 retail, hospitality and leisure businesses

• Funded by increased rates on premises valued over £500,000

VAT changes for Uber and Bolt

Ride-hailing services will now pay the full 20% VAT rate on fares, raising around £700m.

5. Savings, Pensions & Investments

Cash ISA allowance cut to £12,000

This reduces the tax-free allowance (previously £20,000), with the aim of encouraging investment in stocks and shares ISAs.
People aged 65+ can keep the full £20,000 limit.

Relief changes for inheritance tax

Full 100% relief allowance can now be transferred between spouses.

Salary sacrifice pension contributions

From 2029, NI will apply to salary-sacrificed pension contributions above £2,000, raising an estimated £4.7bn.

6. National Spending & Public Services

NHS investment

• £300m for new NHS technology

• 250 new neighbourhood health centres, over 100 of which will be delivered by 2030

Defence spending increased

Defence spending will rise to 2.6% of GDP.

Funding for nations and regional mayors

• Northern Ireland: £317m

• Wales: £505m

• Scotland: £820m
  An additional £13bn of flexible funding will support projects led by regional mayors.

7. Economic Outlook (OBR Forecast)

• Growth is now expected to be 1.4% in 2026 (down from the previous 1.9% forecast).

• Inflation predicted at 3.5% for this year, dropping to 2.5% next year.

• Fiscal headroom has doubled to £22bn by 2029–30, providing additional resilience against economic shocks.

Conclusion

This year’s Budget presents a wide-ranging mix of tax changes, welfare reforms, cost-of-living support and regional investment. While some measures aim to raise revenue through higher taxation, others are focused on easing household pressures, increasing opportunities for young people, and improving long-term economic stability.

The Budget reflects a strategy of balancing fiscal responsibility with targeted social support, positioning the UK for gradual economic recovery over the coming years.