The Autumn Budget delivered by Rachel Reeves to MPs on 26 November 2025 was a white-knuckle fiscal balancing act as the government set out a package of tax rises and targeted spending designed to close a large public finance gap, reduce borrowing as a share of GDP, and protect core public services while also promising measures intended to ease cost-of-living pressures. The package is significant, wide-ranging and technical. Below are the core headlines, the policy detail that matters for households and businesses, and the likely economic and political implications.
1) The scale and aim of the package
• The Budget raises around £26 billions of additional revenue by the end of the forecast period, taking the UK tax burden to record levels by the end of the decade. The Chancellor framed the package as necessary to rebuild fiscal headroom and meet the government’s fiscal rules. Analysts and the Office for Budget Responsibility (OBR) also published updated forecasts alongside the statement.
2) Big-picture fiscal moves that will bite most people
• Income tax / National Insurance thresholds frozen: Personal tax thresholds are frozen for several more years (to 2030–31), a move that produces “fiscal drag” as wages grow, more income becomes taxable and individuals move into higher bands. This is one of the largest single revenue raisers in the package.
• No rise in headline rates: The government stopped short of raising headline rates (e.g., basic/ higher income tax rates) but relied on freezes, allowances cuts and targeted levies to increase receipts.
3) Targeted taxes and allowance changes
• “Mansion tax” on homes above £2 million: An annual levy on residential properties valued over £2m was introduced to raise revenue from the highest value housing stock. The policy is explicitly redistributive but will prompt debate on valuations and market effects.
• Cash ISA allowance cut: The annual tax-free cash ISA limit is cut substantially (from £20,000 to £12,000), reducing a key tax-advantaged saving vehicle for many households.
• Pensions / salary-sacrifice reform: The Chancellor limited the National Insurance advantage from salary-sacrifice pension arrangements by introducing a £2,000 cap on the amount that can be sacrificed without attracting NI, a change aimed at curbing a perk that disproportionately benefited higher earners. This reduces a common workplace saving route and will have consequences for employer schemes and payroll practice.
• New levies on wealth and specific activities: Additional increases are aimed at landlords and certain investment income, and there were also targeted levies on gambling and luxury consumption. Property income is to see its own tax treatment and higher effective rates for landlords were signalled.
• The Treasury also announced a two-percentage-point increase in tax on income from savings and property. It effectively introduces new income tax rates of 22%, 42% and 47% depending on the individual’s personal tax band – from April 2027.
• Tax on dividends, commonly from investments outside an ISA, will also see increases – but from April 2026. The ordinary rate will rise from 8.75% to 10.75% and the upper rate will rise from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35%.
4) Transport, energy and green measures
• Electric vehicle (EV) mileage charge: From 2028 a per-mile charge on full EVs (at 3p per mile, with lower rates for plug-in hybrids) was announced as a way to raise revenue for roads and address the falling fuel duty base as petrol/diesel usage declines. This drew immediate concern from the auto sector and green advocates about its potential effect on EV adoption.
• Fuel duty freeze and other transport measures: Fuel duty remains frozen for now, rail fares were frozen in the statement, and a £3 bus fare cap was extended, measures pitched as protecting household mobility costs.
5) Social spending and protections
• State Pension and the Triple Lock: The government reaffirmed the Triple Lock and announced a notable uprating to the State Pension (around a 4.8% increase in April 2026), which the Chancellor used to argue the Budget protects pensioners’ incomes.
• Two-child benefit cap: The government removed the two-child limit in full, from April 2026.
• Targeted support for families: Reeves highlighted steps to tackle child poverty (for example, ending the two-child benefit cap was a policy direction discussed in accompanying commentary), and limited reductions in certain energy levies were used to argue the package reduces near-term living costs.
6) The OBR forecast and market reaction
• OBR economic update: The OBR released a fresh economic and fiscal outlook alongside the Budget which included downgraded growth and raised questions about productivity and long-term fiscal sustainability. An accidental early leak of the OBR forecasts complicated the rollout and moved markets on the day. The OBR’s numbers remain central to judging whether the package truly creates sufficient headroom.
7) Key takeaways
• Winners: Pensioners (via uprated State Pension), some low-income households benefiting from targeted measures, and public service budgets receiving protected or increased capital spending.
• Losers / pressured groups: Middle-income earners facing stealth tax from frozen thresholds, savers and casual investors losing from reduced ISA allowances, those saving for retirement via salary-sacrifice, landlords and owners of high-value property, and potential EV buyers facing mileage charges.
• Macro trade-off: The package aims to reduce borrowing and rebuild a fiscal buffer, but it does so via measures that can slow demand (and in some cases investment) while leaving long-term growth fragile unless productivity improves, a concern flagged by independent analysts.
Bottom line
The Autumn Budget 2025 is a decisive, technocratic attempt to fix the public finances while protecting vulnerable groups and investing in public services. It delivers substantial revenue by freezing allowances and introducing a suite of targeted levies and reforms, but those same choices create visible winners and losers and pose risks for growth and pensions behaviour. How the OBR’s forecasts play out, and whether productivity and growth respond to the package, will determine whether the Budget’s fiscal ambition becomes a durable repair or a politically costly squeeze.
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Disclaimer
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