Chancellor Rachel Reeves has stood up to deliver her long awaited Autumn Budget for 2025, against a backdrop of the Office of Budget Responsibility report accidentally leaking just ahead of it.
The OBR report revealed the key measures from the Budget, their cost and their expected revenue.
Among them were a continued freeze on tax thresholds, a salary sacrifice raid, a council tax surcharge of homes worth £2million or more, extra tax for savers, pay-per-mile charging for EVs and a continued fuel duty freeze.
The Budget at-a-glance
Rachel Reeves says she will more than double her headroom against her fiscal rules to £21.7billion.
The OBR upgraded GDP forecasts for this year, but downgraded growth expectations from 2026 onwards.
The British economy is expected to grow by 1.5 per cent this year, up from 1 per cent previously. Growth will slow to 1.4 per cent in 2026, down from previous forecasts of 1.9 per cent.
For the next three years, the OBR downgrade from 1.8 to 1.5 per cent, from 1.7 to 1.5 per cent, and from 1.8 to 1.5 per cent.
Consumer price inflation is set to average 2.5 per cent in 2026, up from previous forecasts of 2.1 per cent and well ahead of the Bank of England’s 2 per cent target.
Reeves outlines plans to bolster support for small businesses, manufacturers and defence, as well as investment in the UK’s AI capabilities.
The annual Cash ISA allowance will be reduced to £12,000 for savers under 65.
Reeves rules-out deep cuts to public spending and says Labour will fix the ‘crumbling classrooms the Conservatives left behind’ as she outlined new investment in schools and the NHS.
More cash for local authorities: the Government will hand local and regional leaders £13billion of additional flexible funding for seven mayors. The devolved governments of Northern Ireland, Wales and Scotland will receive an additional £370million, £505million and £820million, respectively.
The Chancellor claims she’ll find £4.9billion of additional savings by 2029 to help pay for it, including efforts to reclaim benefits paid to those who were not legally entitled to them.
She says the Government has also reclaimed £400million in ‘dodgy’ Covid-era contracts.
‘Premium’ cars have been excluded from Motability scheme for disabled people.
Training for under-25 apprentices will be ‘free’ for small businesses, says Reeves, who has put aside another £820million over three years for the ‘youth guarantee’ announced last year.
Scrapping of two child benefit cap confirmed, as well as freezing prescription charges.
Labour is increasing the amount of time someone must live and work in Britain before getting access to a state pension.
Income tax thresholds will be held at their current level for three years. The OBR says this will result in around 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate tax payers by 2029 than in the March forecast.
Increase in basic and higher rate of tax on property, dividends and savings income by 2 percentage points. Chancellor claims 98 per cent of Britons will not pay tax on their savings.
Mansion tax to be collected alongside council tax, raising £400million by 2031. Properties worth more than £2million will face annual fee of £2,500.
Chancellor reveals £2,000 cap on salary sacrifice into pensions by 2029.
Electric cars will play an excise duty for the first time. Fuel duty upgraded in line with inflation.
Sin taxes: Duty on tobacco products to rise, duty on alcohol to rise in-line with inflation, and sweeping changes to gambling taxes.
Energy bills will fall by £150 annual for the average household from April next year.
From the OBR report
The OBR report stated on Rachel Reeves’ Budget measures:
‘Over the medium term, the cost of these measures is more than offset by a wide-ranging set of changes to tax policy which raise receipts and lower borrowing by £0.7 billion in 2026-27 rising to £26.1 billion by 2029-30.
‘As a share of GDP, the policies in this Budget deliver the third-largest medium-term tax increase since the OBR was established in 2010, after the March 2021 and the October 2024 Budgets.’
Tax policies comprise:
A set of personal tax changes which increase receipts by £14.9 billion in 2029-30, including:
• freezing personal tax and employer National Insurance contributions (NICs) thresholds for three years from 2028-29, which raises £8.0 billion;
• charging NICs on salary-sacrificed pensions contributions, raising £4.7 billion; and
• increasing the tax rates on dividends, property and savings income by 2 percentage points, raising £2.1 billion.
Other tax changes increase receipts by £11.2 billion in 2029-30. These include:
• a reduction to the writing down allowance main rate in corporation tax, which raises £1.5 billion;
• a new mileage-based charge on battery electric and plug-in hybrid cars from April 2028, raising £1.4 billion;
• reforms to the taxation of gambling, which raises £1.1 billion
reduced capital gains tax relief on disposals to employee ownership trusts, which raises £0.9 billion;
• a high value council tax surcharge on properties worth over £2 million, raising £0.4 billion;
• tax administration, compliance and debt collection measures, which raise £2.3 billion;
• these tax rises are partially offset by a freeze to fuel duty for a further five months followed by staged increases from September 2026, costing £2.4 billion next year and £0.9 billion each year thereafter;
and
• a range of other tax measures, including the introduction of the Sizewell C regulated asset base (RAB) levy, collectively raise a further £4.4 billion.
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