Rachel Reeves has unveiled her Budget that includes £26 million in tax hikes affecting numerous employees. Reeves emphasized the need for everyone to contribute, but assured that she aims to keep the burden minimal through tax system reforms targeting fairness and greater contributions from the wealthiest individuals.
Accidentally revealed by the Office for Budget Responsibility (OBR) prior to her speech in the House of Commons, additional Budget measures feature significant alterations for savers and the removal of the two-child benefit cap. A new Mirror Budget calculator, created by Blick Rothenberg, allows individuals to assess the impact of these changes on their finances.
With tax thresholds frozen for an extra three years, many workers will face increased tax payments as their incomes rise, a phenomenon referred to as “fiscal drag” or a stealth tax strategy by the government. The income tax personal allowance remains at £12,570, and its freeze has been extended until April 2031.
The minimum wage will rise from April next year, with a 4.1% increase to £12.71 per hour for workers aged 21 and over. Other age groups will also see wage increases, benefitting a total of 2.7 million workers according to the Government.
A significant change for savers is the reduction of the cash ISA limit to £12,000 starting from April 2027, affecting individuals under 65. The Chancellor also disclosed an increase in tax rates for savings interest from April 2027, impacting various taxpayer segments.
State pension adjustments include a 4.8% increment from next April, aligning with the triple lock system. However, changes to salary sacrifice schemes will affect pension savers from April 2029, with a new cap of £2,000 annually.
Various adjustments in the Budget aim to mitigate household expenses, such as the removal of the two-child benefit cap in April 2026 and increases in welfare payments including Universal Credit. Additionally, fuel duty decreases and increases in alcohol and tobacco duties are set to take effect in the coming years.
The Chancellor’s Budget brings changes to various financial aspects affecting different segments of the population, signaling a mix of challenges and opportunities in the fiscal landscape ahead.