Chancellor Rachel Reeves has presented her second Budget amidst unexpected drama after the Office for Budget Responsibility prematurely released its economic forecasts. The Autumn Statement introduces significant financial measures affecting workers, motorists, homeowners and savers across the UK.
Tax Changes and Earnings Impact
While income tax rates remain unchanged, the Chancellor has extended the freeze on income tax thresholds until the end of the 2030-31 financial year. This stealth tax measure will gradually pull more earners into higher tax brackets as wages increase with inflation. According to OBR projections, nearly one million additional taxpayers will find themselves in the higher rate band by the freeze's conclusion.
Minimum wage workers will see substantial increases from April next year. Workers aged 21 and over will receive £12.71 per hour, representing a 4.1% rise, while those between 18-20 will see their hourly rate jump by 8.5% to £10.85.
Property and Savings Adjustments
Homeowners with properties valued above £2 million will face a new Mansion Tax starting in 2028. The levy will operate across four bands, with charges ranging from £2,500 for the lowest band to £7,500 for properties exceeding £5 million in value.
Savings and investment rules undergo significant modification. The current £20,000 annual ISA allowance remains unchanged for the coming tax year, but from April 2027, cash ISA contributions will be limited to £12,000, with a separate £8,000 allowance for stocks and shares ISAs. Pension savers can breathe easier as the popular tax-free lump sum remains intact, though changes to National Insurance benefits for salary sacrifice schemes will take effect from 2029.
Motorists and Household Bills
Petrol car drivers receive temporary relief with a five-month fuel duty freeze, but face increased costs from September 2026 when the temporary 5p price cut ends. From April 2027, fuel duty will rise in line with RPI inflation. Electric vehicle owners will encounter a new pay-per-mile tax starting April 2028, estimated to cost average drivers £255 annually at 3p per mile.
Household energy bills are set to decrease by approximately £150 annually due to government reforms shifting green levies from consumer bills to general taxation. However, landlords will pay higher taxes on rental income, with basic rate taxpayers facing a 22% rate, while higher and additional rate taxpayers will pay 42% and 47% respectively.
Student loan borrowers with Plan 2 arrangements (taken between 2012-2023) will see their repayment terms frozen for three years from 2027-28, maintaining a 7.9% interest rate and £28,470 repayment threshold.
