Finance
Key measures in the budget proposed by UK finance minister Reeves
Published by Global Banking and Finance Review
Posted on November 26, 2025
4 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 26, 2025
4 min readLast updated: January 20, 2026
UK finance minister Reeves announced key budget measures, including income tax threshold freeze, new council tax surcharge, and a mileage-based charge for electric vehicles.
LONDON (Reuters) -British finance minister Rachel Reeves delivered her budget statement to parliament on Wednesday, taking more tax from workers, people saving for a pension and investors to give herself more room to meet her borrowing targets.
Reeves' speech came after the Office for Budget Responsibility unexpectedly published its outlook on its website ahead of Reeves delivering her budget. It later apologised for what it described as a technical error.
Below are the key measures she announced:
INCOME TAX THRESHOLD FREEZE
Britain will freeze the thresholds for paying income tax for three further years from 2028, Reeves said, with the move expected to raise 7.6 billion pounds ($10.1 billion) in 2029/30.
NEW TAX ON EXPENSIVE HOMES
Reeves will introduce a new high-value council tax surcharge in England starting in 2028, with an annual charge of 2,500 pounds for properties valued over 2 million pounds, increasing to 7,500 pounds for properties worth more than 5 million pounds.
This will be collected alongside council tax and is expected to raise over 400 million pounds by 2031 and will be charged on fewer than the top 1% of properties.
FREEZE ON FUEL DUTY RATES
Britain will maintain a freeze on the level of fuel duty rates. Reeves said the temporary 5 pence cut to fuel duty introduced during the COVID-19 pandemic, which will come to an end in April next year, will be extended until September 2026. Successive governments have kept fuel duty frozen since 2011, fearful of protests by drivers. The duty is a big revenue-raiser, bringing in around 25 billion pounds a year.
TWO-CHILD WELFARE CAP
The two-child limit on welfare payments will be removed from April, Reeves said. The two-child welfare cap, introduced by the Conservative government in 2017, means many low-income families do not receive further benefits when they have a third child or subsequent children.
The OBR said scrapping the cap would cost 3.1 billion pounds in 2029-30.
NEW ELECTRIC CARS CHARGE
A new mileage-based charge for electric and plug-in hybrid vehicles would take effect in April 2028, a measure expected to raise 1.4 billion pounds. The OBR said the new levy was intended to offset roughly a quarter of the 0.6% of GDP in revenue expected to be lost from fuel duty by 2050 due to the shift to electric vehicles. It would be set at about half the fuel duty rate currently paid by petrol car drivers.
Reeves said the mileage tax for electric vehicles would be 3 pence per mile, while plug-in hybrid cars will incur a charge of 1.5 pence per mile.
DIVIDEND TAX RATES
The government will increase tax rates on dividends by 2 percentage points, Reeves said. The rate of dividend tax from April next year will increase to 10.75% for the basic rate of tax and to 35.75% for the higher rates of tax, the OBR said.
CHANGES TO COMMERCIAL PROPERTY TAXES
Reeves said changes to commercial property taxes, or business rates, will increase rates for high-value properties, while permanently lowering tax rates for over 750,000 retail, hospitality, and leisure properties. The reductions would be funded by higher rates on properties valued at 500,000 pounds or more, including warehouses used by online giants.
GAMBLING, ALCOHOL
There will be increased duties on gambling in a move which will raise an estimated 1.1 billion pounds for the government by 2029-30. Reeves said she would also raise alcohol duties in line with inflation.
'MOTABILITY' SCHEME
The so-called 'motability' scheme, which allows people with disabilities to lease cars using state funding, is set to be reformed in order to curb what Reeves described as "generous" taxpayer subsidies.
PENSION PERK SLASHED
The government will cap the amount of money that can be shifted into pensions before National Insurance is charged to employers and staff at 2,000 pounds a year from 2029, a move expected to raise an extra 4.7 billion pounds in 2029/30.
TAX-FREE SAVING ALLOWANCE CUT
The annual, tax-free limit for cash investments in an Individual Savings Account will be reduced from 20,000 pounds to 12,000 pounds for most savers from April 2027, though over-65s will keep the full allowance.
ENERGY BILLS REDUCTION
Britain will remove 150 pounds a year on average from energy bills by moving costs to general taxation and cutting a scheme to help pay for home improvements from April next year.
($1 = 0.7557 pounds)
(Reporting by Catarina Demony; additional reporting by Sam TabahritiEditing by William James, Sarah Young and Ed Osmond)
A pension scheme is a retirement plan that provides individuals with income after they retire, often funded by contributions during their working life.
A council tax surcharge is an additional tax levied on properties that exceed a certain value, aimed at generating revenue for local councils.
A welfare cap refers to a limit on the amount of welfare benefits a family can receive, often affecting families with multiple children.
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