Budget in brief: what you need to know
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Here are the key points from UK chancellor Rachel Reeves’ second Budget. It raises taxes by £26bn, taking the burden to an all-time high of 38 per cent of GDP by the end of the parliament.
Main policy announcements
Freeze in personal tax thresholds will be extended from April 2028 until April 2031, raising £8.3bn by the end of the decade. The policy drags more people into the tax system or higher tax brackets each year as their pay increases.
Salary sacrifice pension contributions will be capped at £2,000 before national insurance applies, raising £4.7bn in 2029-30.
Council tax surcharge will be applied to homes worth more than £2mn from April 2028, raising £400mn in 2029-2030.
Two-child benefit cap will be scrapped, adding about £3bn to the welfare bill. The current cap limits the number of children for whom low-income families can claim welfare benefits.
Cash Isa allowance to be cut from £20,000 to £12,000 for people under the age of 65, as of April 2027. Over-65s will retain the existing allowance.
Other key measures
Tax rate on dividends, savings and property income to rise by 2 percentage points, raising £2.1bn.
Electric vehicles will be subject to a mileage-based charge, raising £1.4bn.
Online gaming levy to rise from 21 per cent to 40 per cent, while the levy on online sports betting will increase from 15 per cent to 25 per cent. These and other new taxes on gambling will raise £1.1bn.
Tobacco duty revenues up by 0.8 per cent year on year to £8bn in 2025-26, and a new immediate higher duty on vapes will raise £600mn by 2030-31.
Fuel duty freeze phased out from September 2026, meaning first increase in petrol and diesel bills in 15 years.
Small parcel tax loophole closed, so all parcels from overseas have to pay customs duty.
Fiscal outlook
Fiscal headroom is £22bn, up from £9.9bn in the Spring Statement in March, but still below the 2010-2022 average of £31bn. Fiscal headroom is the buffer that Reeves has against her promise to fund day-to-day spending — excluding investment — entirely with tax receipts by 2029-30.
Public sector borrowing is forecast to hit £138bn in 2025-26, some £21bn higher than estimated in March, and to be higher than previously projected until 2028-29. The rise is driven by policies that increase public spending by £11.3bn in 2029-30, including U-turns on cuts to winter fuel payments and health-related benefits, as well as higher departmental and capital spending.
Public debt is forecast to rise from 83.1 per cent of GDP this year to a peak of 83.7 per cent in 2028-29, before falling to 83 per cent in 2029-30. This gives the government a 52 per cent chance of meeting its “investment” rule, under which debt must be falling by the end of the decade.
Current budget is expected to turn into a surplus by 2028-29, meeting the government’s “stability” rule of matching day-to-day spending with revenues by the end of the decade.
Economic forecasts
Growth will be 1.4 per cent in 2026, down from a forecast of 1.9 per cent in March. But the economy is expected to expand by 1.5 per cent in 2025, up from a previous estimate of 1 per cent. Over the forecast period, average growth is estimated at 1.5 per cent, some 0.3 percentage points slower than projected in March.
Inflation will stand at 3.5 per cent in 2025, above the 3.2 per cent forecast in March. Price growth is expected to be 2.5 per cent in 2026, higher than the 2.1 per cent forecast in spring.
Productivity growth is forecast to be 1 per cent over the medium term, 0.3 percentage points below the estimate in March, weighing on economic growth and living standards.
Register for our November 28 live webinar (and put your questions to our panel) on what the Budget will mean for your property and your finances with FT journalists Claer Barrett, Stuart Kirk, Tej Parikh and special guest, tax expert Dan Neidle.
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