Tax Changes & Fiscal Drag
- The thresholds for income tax will be frozen for another three years starting 2028, increasing the chance that pay rises push people into higher tax bands. This is expected to raise around 8 billion.
- Taxes on dividends, savings, and property income will increase by 2 percentage points, estimated to raise about 2.1 billion.
- Capital gains tax relief for business sales to employee-ownership trusts will be reduced from 100% relief to 50% raising roughly 900 million.
New & Increased Levies
- The gambling industry faces significantly higher taxes: remote gaming duty jumps from 21% to 40%, and online betting taxes increase to 25%.
- A new mileage-based tax on electric vehicles (EVs) is introduced: 3p per mile for EVs and 1.5p per mile for plug-in hybrids; projected to raise 1.4 billion.
- A new "mansion tax" targets high-value properties: homes worth over 2 million will pay extra e.g., 2,500 for 22.5 million properties, up to 7,500 for 5 million homes estimated to raise 400 million.
Savings, Benefits & Welfare Reforms
- The annual tax-free allowance for cash ISAs will be cut from 20,000 to 12,000 (for under-65s), encouraging investment in stocks-and-shares ISAs instead.
- The controversial "two-child benefit cap" will be scrapped from April 2026, potentially lifting around 450,000 children out of poverty. This change will cost the public purse an estimated 2.3 billion.
- From April 2029, salary-sacrifice pension contributions above 2,000/year will be subject to National Insurance expected to generate 4.7 billion.
Cost-of-Living Relief & Income Support
- The minimum wage / national living wage will rise: for those aged 21+, it will move to 12.71/hr; younger workers (1820) will see 10.85/hr.
- Basic state pension and the "new state pension" will increase by approximately 440 and 575 per year respectively.
- Fuel duty remains frozen, offering some relief at the pumps for now.
What It Means for People
- Many workers may experience "fiscal drag" meaning even without a pay rise, they could end up paying more tax if thresholds remain frozen while wages rise.
- Savers relying on cash ISAs will see lower tax-free allowances; pushing money into stocks-and-shares ISAs may become more attractive.
- Households with children may benefit from the end of the two-child benefits cap.
- Buyers and owners of high-value homes, and users of EVs, face additional taxes under the new measures.
- On the upside, higher minimum wage and pensions, combined with certain tax freezes, may help to offset some of the financial pressures many families face.
