Chancellor Rachel’s Reeves big moment in the Autumn Budget on 26th November was hijacked by the OBR’s (Office for Budgetary Responsibility) unprecedented, premature release of their Budget Report, which erroneously disclosed all of the Chancellor’s revisions to the tax landscape just minutes before she had chance to step up to the Despatch Box.
Speculation and leaked information had been rife for weeks in the build up to the Budget with varying forecasts seemingly shifting the policies to and fro, until the ultimate leak was sprung announcing total tax increases of £26 billion by 2030.
Rumours of increases in income tax rates had been quelled in the days prior to the Budget announcement amidst a backlash amongst some backbenchers and an improvement in the OBR’s financial forecasts. Central to Labour’s manifesto was the promise that they would not raise taxes on ‘working people’, citing income tax, national insurance and VAT as such.
So where have the increases come from? The reforms are many and varied but the leading source of the tax take will be derived through the further freezing of the tax band thresholds. Initially frozen until 2028 these thresholds will now be frozen until 2031, raising an approximate additional £8B for the exchequer.
Small businesses can rightly feel hard done to across recent Budgets and this one has inflicted further tax pain. A two percent increase on dividend tax from April 2026 will likely hit small business owners hard and further exacerbates the disparity with self-employment taxes once the previous increases in Corporation Tax rates are also taken into account.
Increases in the National Minimum Wage may well provide some much-needed support for lower earners, but this also has the knock-on effect for Employers who had already been liable for increased National Insurance contributions in the 2024 budget.
Investors will also feel the pinch from this budget with a 2% increase in rental profits and in taxable savings income from April 2027. Clear incentive is being given for savers to move their funds into Stock and Shares ISA’s and slow their investments into cash ISA’s with a decrease in the annual allowable contributions from £20k to £12k from April 2027.
Amongst other measures, further tax revenue increases are expected from a tightening of the salary sacrifice on pension contributions above £2k per year which will from April 2029 become liable for National Insurance. An uplift charge on Council tax will be levied on any property valued above £2m from April 2028 and electric car drivers are set to be charged 3p per mile, also from April 2028.
Whilst the above major changes represent the majority of the announced £26B tax increase, there are many more which tweak former policies. Prior rumours of a larger tax take were ultimately not fully realised and most of the changes have been pushed into the later years of this current parliament so there is ample time to plan for the reforms.
Will the Chancellor’s latest measures deliver the growth and support that is required to reinvigorate the UK Economy? This remains very much to be seen. What we can be sure of is that at least for the moment we’re all likely to be paying more tax going forwards.
Robin Maxwell
Robin MaxwellRobin Maxwell is a partner of Rogers Spencer and has been working with us since 2003. Robin specialises in Accountancy Solutions, Audits and Tax and VAT. Find out more about Robin here.