Chancellor Rachel Reeves delivered her budget on November 26, 2025, aiming to raise £26 billion in taxes to repair public finances while funding new cost-of-living support. The announcement was preceded by a "shock accidental release" of key details by the Office for Budget Responsibility (OBR) an hour before the speech, which revealed the scale of the tax rises but also a positive market reaction to the government's fiscal headroom.

Key Tax Measures

1. Personal Taxation & Savings

• Fiscal Drag Extended: Income tax thresholds will remain frozen until 2031. This extension of "fiscal drag" is a major revenue raiser, expected to generate an extra £8 billion and push the overall tax burden to a historic high of 38% of GDP.
• Savings & ISAs: The tax on savings income will increase by 2 percentage points. Additionally, new ISA rules taking effect in April 2027 will require savers investing the full £20,000 allowance to allocate at least £8,000 into stocks and shares rather than cash, aiming to boost equity investment.
• Capital Gains: News coverage confirms that while headline rates for some taxes remained stable, reliefs for business disposals were tightened.

2. Property and Housing

• Wealthy Homeowner Levy: A new annual property tax targets high-value homes:
  • Properties worth £2m+ will pay an extra £2,500/year.
  • Properties worth £5m+ will pay an extra £7,500/year.
• Rental Market: Landlords face a 2 percentage point increase in the tax on rental income starting April 2027.

3. Transport: The New "Pay-Per-Mile" for EVs

To replace declining fuel duty revenue, a new Electric Vehicle Excise Duty will launch in April 2028.

• Rates: Electric cars will be charged 3p per mile, while plug-in hybrids will pay 1.5p per mile.
• Impact: For an average EV driver covering ~9,000 miles, this adds roughly £270 per year.
• Exemptions & Changes: Electric vans are initially exempt. To support EV uptake, the "expensive car supplement" threshold for EVs (which triggers extra Vehicle Excise Duty) has been raised to £50,000.

4. Education: International Student Levy

A new levy on universities for overseas students aims to raise funds for domestic education, specifically to reintroduce maintenance grants.

• The Cost: Universities will be charged £925 per international student per year starting August 2028.
• Allowance: News reports clarify that universities will receive an allowance covering their first 220 international students, protecting smaller institutions.
• Sector Reaction: The university sector has warned this could cost them £330 million annually and risk making UK higher education less competitive.

5. Public Health: Expansion of the Sugar Tax

• New Targets: From 2028, the sugar tax will extend to pre-packaged milk-based drinks (e.g., supermarket milkshakes, lattes) that exceed a lowered threshold of 4.5g sugar per 100ml.
• Exclusions: Freshly made milkshakes sold in cafes and coffee shops remain exempt.

Cost of Living & Welfare

• Energy Bills: A £150 cut to average household energy bills.
• Welfare Reform: The controversial two-child benefit cap will be scrapped effective April 2026, a move projected to lift hundreds of thousands of children out of poverty.
• Fare Freeze: Regulated rail fares will be frozen for another year.