Millions Face Higher Taxes Under Reeves’ New Budget

Published: 27 November 2025 Thursday. The English Chronicle Desk. The English Chronicle Online.

In one of the most closely watched Budgets in recent years, Chancellor Rachel Reeves has announced a sweeping package of tax measures worth £26bn, insisting that the burden will fall mainly on those “with the broadest shoulders”. As Britain continues to grapple with rising living costs and a slowing economy, Reeves argued that the measures are essential to stabilise the nation’s finances, protect public services, and steer the country away from what she described as “the chaos Labour inherited”.

The centrepiece of the Budget is a decision to extend the freeze on income tax and National Insurance thresholds for an additional three years, pushing the deadline to April 2031 for England, Wales and Northern Ireland. This move, which economists widely interpret as a “stealth tax”, is expected to pull millions more people into higher tax bands as their incomes rise while thresholds remain static. The Office for Budget Responsibility (OBR) estimates that almost one in four taxpayers will be paying at the higher rate by early 2031, a dramatic shift from today’s tax landscape.

Reeves acknowledged the financial strain this decision may cause for working households. Speaking to MPs in the House of Commons, she noted that maintaining the thresholds was “a decision that will affect working people”, adding that it would be disingenuous to pretend otherwise. However, she emphasised that the freeze was a necessary component of a broader strategy to avoid both reckless borrowing and a return to austerity. “I am asking everyone to make a contribution,” she said, “but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer.”

Among the most notable of these reforms is a new annual charge on high-value properties worth more than £2m. The charge, which will take effect from April 2028, begins at £2,500 for homes valued at just over £2m but climbs to £7,500 for properties worth £5m or more. The levy, added on top of council tax, is expected to significantly increase the tax burden on wealthier households, particularly those in London and the South East, where property values remain substantially higher than the rest of the UK.

Reeves argued that this measure, along with new taxes on savings and investments, demonstrates Labour’s commitment to ensuring that the richest contribute more. She also announced a new duty on online betting, raising it from 15% to 25%, a move that will impact gambling firms and heavy online bettors alike. A tax on electric vehicles—3p per mile for fully electric models and 1.5p for plug-in hybrids—is also set to be introduced, a decision that has already attracted scrutiny from climate campaigners who see the policy as contradictory to the government’s environmental goals.

The Budget also introduces a significant change to salary sacrifice pension schemes, capping the National Insurance-exempt contribution at £2,000 per year. Reeves justified this change by claiming that the current system disproportionately benefits higher earners who can afford to divert large portions of their salary into pensions, effectively reducing their tax liability.

Notably, Reeves made the politically sensitive decision to scrap the controversial two-child benefit cap, a policy long criticised by charities and campaigners for pushing low-income families deeper into poverty. Removing the cap was a key Labour promise, though critics have questioning how the government will balance increased welfare spending with its plans for fiscal discipline.

The chancellor insisted that the government had honoured its manifesto commitment not to increase VAT, the main rate of income tax, or National Insurance contributions. She reiterated that the new measures targeted structural loopholes rather than the incomes of ordinary workers, stating that without such reforms, Labour would have been forced to introduce far harsher tax increases.

Despite Reeves’ reassurances, the Conservatives immediately attacked the Budget. Senior Tory MPs argued that Labour had broken its promise not to return to the public for more tax revenue. Shadow Chancellor James Cartlidge accused Reeves of a “betrayal of trust”, calling on her to resign and describing the Budget as a “blunt assault on aspiration, entrepreneurship and ordinary family finances”. He also warned that the accumulation of small, targeted tax rises risked burdening consumers and businesses in unpredictable ways.

Reeves rejected this criticism, maintaining that her approach was rooted in fairness and necessity. The chancellor positioned the Budget as a course correction after what she described as years of “mismanagement and instability” under Conservative leadership, which she said had left public services underfunded and key infrastructure projects delayed or abandoned.

A dramatic moment unfolded minutes before Reeves delivered her Budget speech when the OBR accidentally published key projections on its website. Reeves learned of the leak shortly before stepping into the chamber and expressed her frustration, calling the incident “deeply disappointing and a serious error on their part”. The OBR has since apologised, blaming the incident on a “technical error” and announcing an internal investigation into how the confidential forecast was mistakenly made public.

According to the OBR’s projections, the UK’s tax burden will rise to 38% of national income by 2030–31, the highest level since records began. The watchdog also reported that economic growth is expected to slow in the coming years, a warning that underscores the seriousness of the government’s fiscal challenges. Despite this, Reeves insisted that her Budget charts a responsible path forward, arguing that abandoning fiscal discipline now would jeopardise long-term stability.

Reeves framed the Budget as a critical step toward rebuilding trust in government, restoring confidence in public institutions, and laying a foundation for sustainable growth. She highlighted investments in public services and initiatives targeting the cost of living, including energy support measures, expanded childcare offerings and further commitments to affordable housing.

The chancellor closed her speech by declaring that there would be no return to austerity under Labour and no irresponsible spending that could destabilise the economy. She argued that her Budget represented a balance between fairness and fiscal responsibility, calling it “a Budget for fair taxes, strong public services, and a stable economy”.

While the political debate over the Budget is sure to intensify in the coming weeks, one thing is clear: the financial landscape for millions of people across the UK is about to shift significantly. Whether Reeves’ strategy will succeed in delivering economic resilience without overburdening ordinary families remains to be seen, but the decisions made in this Budget will shape the country’s fiscal course for years to come.