Chancellor Rachel Reeves's first Budget has set out a financial roadmap for the UK, with significant changes to taxes, benefits, and household costs scheduled over the coming years. The extensive package of measures will be introduced in stages, impacting millions of Britons from 2026 onwards.
Major Shifts in 2026: Pensions, Benefits, and Daily Costs
The year 2026 marks the beginning of the most substantial reforms. From April 2026, a major social policy shift will occur as the two-child benefit cap is axed, allowing families to claim Universal Credit or Tax Credits for third and subsequent children.
Pensioners and benefit claimants will also see their incomes rise. The state pension will increase by 4.8% in April 2026, taking the full new state pension to £241.30 a week. Most other Department for Work and Pensions (DWP) benefits will rise in line with inflation, with the Universal Credit standard allowance receiving a larger boost to £98 a week for single claimants over 25.
However, household budgets will face pressures elsewhere. Alcohol duty will rise by 3.66% from February 2026, adding approximately 11p to a bottle of Prosecco. From April, car tax will increase in line with inflation. A small relief comes from a promised £150 cut to the average energy bill, also from April 2026, achieved by scrapping the Energy Company Obligation scheme.
Other key 2026 dates include a minimum wage increase to £12.71 for those aged 21 and over in April, and the end of the 5p fuel duty cut in September, which will then be gradually reversed.
2027 and Beyond: Savings, Property, and New Taxes
The financial landscape will continue to evolve in 2027, with several changes focused on savings and property. From April 2027, the annual cash ISA limit for under-65s will be cut from £20,000 to £12,000.
Taxes on savings and property income are also set to rise. Basic-rate taxpayers will see the rate on savings interest above their allowance increase from 20% to 22%, with corresponding hikes for higher and additional-rate taxpayers. Landlords will face similar increases on the tax paid on their property interest.
In a significant change to estate planning, pensions will become subject to Inheritance Tax from April 2027, meaning they will be included in the valuation of a deceased person's estate.
Looking further ahead, 2028 will introduce new charges for owners of expensive homes and electric vehicles. A new 'mansion tax' surcharge for properties over £2 million will begin in April 2028, while electric vehicle drivers will start paying a 3p per mile tax.
The Long-Term Stealth Tax and Silver Linings
One of the most impactful long-term measures is the extension of the freeze on income tax thresholds until April 2031. This policy, often described as a stealth tax, drags more people into higher tax brackets as their wages grow, increasing the Treasury's revenue without officially raising tax rates.
Amid these changes, there are some permanent positives. The government has confirmed that the Help to Save scheme for people on Universal Credit will be made permanent from 2028. This scheme provides a 50p bonus for every £1 saved. Furthermore, passengers in England will benefit from rail fares being frozen until 2027, and the cost of an NHS prescription will remain at £9.90.
