Chancellor Rachel Reeves has been forced to deliver her highly anticipated Budget 2025 statement after the Office for Budget Responsibility accidentally leaked the entire fiscal forecast hours before her Commons address.
Major Tax Measures Revealed
The centrepiece of the £26 billion tax raising package is the extension of the freeze on personal income tax thresholds, which was due to expire in 2028 but will now continue for an additional three years. This controversial move directly contradicts Ms Reeves' previous stance, where she stated such action would "hurt working people".
According to the leaked OBR report, this threshold freeze alone will drag nearly two million more taxpayers into higher tax bands, generating an estimated £8 billion for the Treasury in the 2029-2030 financial year.
Additional Tax Reforms and Spending
The Chancellor confirmed several smaller but significant tax changes, including a new "mansion tax" on properties valued over £2 million, expected to raise £0.4 billion by 2029-30.
In a move affecting pension contributions, salary-sacrificed pension contributions above an annual £2,000 threshold will lose their national insurance exemption, generating an estimated £4.7 billion in additional revenue.
Further measures include increasing tax rates on dividends, property and savings income by two percentage points, raising £2.1 billion, while the cash ISA allowance will be reduced by £8,000 for most savers, though over-65s will be exempt.
On the spending side, the government will scrap the controversial two-child benefit cap, a move welcomed by Labour backbenchers that contributes to an £11 billion increase in public spending.
Leak Fallout and Economic Impact
Ms Reeves expressed her frustration at what she called a "deeply disappointing" leak from the fiscal watchdog, describing it as "a serious error on their part". The OBR has since apologised for what it termed a "technical error".
The Budget measures will push the UK's tax burden to a record 38% of GDP by 2030-31, the highest level ever recorded. Defending her approach, the Chancellor stated these decisions were necessary to "cut NHS waiting lists, cut the cost of living and cut the debt and borrowing".
Other notable announcements include maintaining the 5p fuel duty cut until September 2026, introducing a new mileage tax for electric vehicles from April 2028, and providing £13 billion in funding for seven regional mayors to invest in skills and infrastructure projects.
