UK Chancellor of the Exchequer Rachel Reeves has unveiled a sweeping package of £26 billion in tax increases as part of her Autumn Budget 2025, marking one of the most significant fiscal adjustments in decades. The measures come as the Office for Budget Responsibility (OBR) downgraded economic growth forecasts, warning of slower expansion, higher inflation, and rising unemployment in the years ahead BreakingNews.ie Yahoo News UK RTÉ Ireland.
Key Tax Measures
- Income Tax Threshold Freeze: More than 1.7 million workers will be drawn into paying higher income tax as thresholds remain frozen, pushing many into new tax bands as wages rise BreakingNews.ie Yahoo News UK.
- Mansion Tax: A new surcharge on properties worth over £2 million, expected to affect up to 200,000 homes, will add between £2,500 and £7,500 annually depending on property value Yahoo News UK Sky News.
- Pensions and Savings: Salary sacrifice pension contributions above £2,000 will now face national insurance, while changes to cash ISAs and investment rules will tighten tax reliefs The Independent.
- Gambling Levies: New charges on the gambling industry were introduced, while fuel duty remains frozen until next year Yahoo News UK.
Political and Economic Context
Reeves defended the hikes as “the right choices for a fairer, stronger, and more secure Britain,” arguing that the measures are necessary to safeguard fiscal stability while funding welfare reforms, including the abolition of the two‑child benefit cap Yahoo News UK Kent Online.
The OBR forecasts GDP growth of 1.5% in 2025, but downgraded projections for subsequent years, with growth expected to slow to 1.4% in 2026 and remain at 1.5% through 2029 BreakingNews.ie. The tax burden is now projected to reach an all‑time high by 2030/31, raising concerns among critics that households will face mounting financial pressure BreakingNews.ie Kent Online.
Outlook
The £26 billion tax package is designed to double the government’s fiscal buffer against borrowing rules, giving Reeves more room to maneuver as public spending rises. However, the measures have sparked sharp debate in Westminster, with opposition MPs warning of the impact on working families and investors.
As the UK grapples with weaker growth and fiscal constraints, Reeves’ budget signals a decisive shift toward higher taxation and expanded welfare spending, setting the stage for contentious political battles in the months ahead.
Chancellor Rachel Reeves Picture on Flickr by UK HM Treasury
