Chancellor raises billions in Budget

Chancellor of the Exchequer Rachel Reeves set out tax-raising measures worth up to £26 billion in the Autumn Budget that was overshadowed by an extraordinary leak from the Office for Budget Responsibility (OBR). The fiscal watchdog accidentally published its own report before the Chancellor addressed Parliament, revealing the key measures in the Budget in the process.

In this month's Hot Topic, we look at the major tax and spending decisions announced on 26 November.

Range of measures

The Chancellor's tax increases will be achieved through a range of measures, including extending the freeze on Income Tax thresholds for a further three years.

Ms Reeves also announced extra spending of £11.3 billion, including an extra £9 billion on welfare.

Despite the uplift in spending the Chancellor has more than doubled her fiscal headroom from around £10 billion to around £22 billion, according to the OBR.

On Income Tax the personal allowance, the higher rate threshold and additional rate threshold are frozen at £12,570, £50,270 and £125,140, respectively, until 2030/31.

The basic rate of tax is 20%. For 2026/27 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% rate applies is £50,270 for those who are entitled to the full personal allowance.

Taxes on property, dividend and saving income – which currently face no equivalent of National Insurance contributions (NICs) – will be increased by up to 2%.

Salary sacrifice

From April 2029, the government will charge employee and employer NICs on any pension contributions made via salary sacrifice above £2,000 a year. 

The Budget also halves Capital Gains Tax (CGT) relief for company owners selling their businesses to Employee Ownership Trusts from 100% to 50%.

In addition, the Budget introduced a High Value Council Tax Surcharge on homes worth more than £2 million while protecting those on low incomes.

Individual Savings Accounts (ISAs) will be reformed from April 2027 when the annual cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Other limits remain at £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031.

National Living Wage and National Minimum Wage

The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2026.

From 1 April 2026, the NLW will increase by 4.1% to £12.71 per hour. The NMW for 18–20 year olds will also increase by 8.5% to £10.85 per hour and for 16–17 year olds and apprentices by 6.0% to £8.00 per hour. 

Benefit cap

The Chancellor also took action to cut £150 off energy bills, freeze rail fares and end the two-child benefit cap.

The government is extending the 5p Fuel Duty cut until the end of August 2026, with rates then gradually returning to March 2022 levels by March 2027.

My choice

Ms Reeves said: 'I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 taken off the average household energy bill from April. 

'Money off bills and in the pockets of working people. That is my choice.'