Chancellor Rachel Reeves has delivered a tax‑raising Budget that extends the freeze on personal tax thresholds to April 2031, removes the two‑child limit in Universal Credit from April 2026, and sets out measures that increase receipts by amounts rising to around £26bn a year by 2029‑30. The Office for Budget Responsibility (OBR) says the package lifts the Chancellor’s fiscal headroom to about £22bn and takes the tax take to a post‑war high near 38% of GDP by 2030‑31.
On welfare, the government will abolish the two‑child limit in Universal Credit from April 2026. The OBR estimates the policy will cost £2.3bn in 2026‑27, rising to £3.0bn in 2029‑30, with around 560,000 families gaining by an average of £5,310 a year in 2029‑30. Ministers estimate it will reduce child poverty by 450,000 by 2029‑30 relative to leaving the limit in place.
Ministers coupled that decision with cost‑of‑living measures. The Budget reduces average energy bills in Great Britain by roughly £150 in 2026‑27 by part‑funding the Renewables Obligation and ending the Energy Company Obligation on bills, expands the Warm Home Discount, freezes regulated rail fares in England for 2026, keeps the £3 bus cap to March 2027, and freezes prescription charges for a year. The Department for Transport says the one‑year rail freeze is the first in three decades.
The revenue package centres on maintaining income‑tax and National Insurance thresholds to 2031, new higher rates on property, dividend and savings income from 2026‑27, a cap on NICs relief for salary‑sacrifice pension contributions above £2,000 from 2029, and a mileage‑based levy on electric vehicles from 2028. A High‑Value Council Tax Surcharge on homes valued at £2m+ starts in April 2028. Duties on remote gambling rise sharply, while bingo duty is abolished from April 2026.
Minimum wage policy is set for another step up. Following Low Pay Commission advice accepted by ministers, the National Living Wage for workers aged 21+ will increase to £12.71 an hour in April 2026, with youth and apprentice rates also rising. The government’s October 2024 decision to raise the NLW to £12.21 from April 2025 remains in force.
Business rates will be rebalanced from April 2026 with permanently lower multipliers for eligible retail, hospitality and leisure properties and a new higher “high‑value” multiplier for premises with rateable values of £500,000 and above. A £4.3bn three‑year support package, including redesigned Transitional Relief, will cap bill increases following revaluation. Trade bodies warn some sites could still face higher bills as reliefs change alongside new valuations.
Alongside the Budget, ministers have adjusted their employment reform timetable. The government will legislate for day‑one rights to sick pay and paternity leave from April 2026, but unfair‑dismissal protection will now begin after six months’ service rather than on day one, following talks with unions and business.
Markets took the fiscal event in stride despite an unprecedented early publication of the OBR’s Economic and fiscal outlook on Budget day. Gilt yields eased after the eventual statement, and the watchdog has launched a rapid investigation into the publication error with external cyber expertise.
Public reaction has been cool. A YouGov post‑Budget survey finds Britons are more likely to view the package as unfair than fair, with very few expecting to be better off personally. The freeze on thresholds is widely seen as a “stealth tax”, even as some specific measures (such as rail‑fare and gambling‑tax decisions) draw support.
The OBR has pared back medium‑term growth, citing weaker productivity. It now projects real GDP growth around 1.5% a year from 2027 to 2030, with inflation a little higher near term than in March. The watchdog judges public finances “vulnerable”, even with a larger buffer, and expects the tax burden to remain elevated through the decade.
For households, the near‑term picture is tighter disposable incomes due to threshold freezes and modestly higher inflation, partly countered by energy‑bill support, frozen rail fares and rising minimum wages. Families with more than two children on Universal Credit should plan for higher awards from April 2026, subject to caseload and take‑up.
For employers, key operational dates include April 2026 for business‑rates reforms and minimum‑wage uplifts, April 2026–27 for higher taxes on dividends and savings income, April 2028 for the High‑Value Council Tax Surcharge, and 2028 for the new EV mileage levy. Online gambling operators face staged duty increases from April 2026 and April 2027.
Next steps to watch: publication of the government’s Child Poverty Strategy, which officials say is due after the Budget; passage of the Employment Rights Bill with the revised unfair‑dismissal threshold; and the OBR’s report on the early‑publication incident. Each will shape the delivery and politics of this fiscal package.