Chancellor Rachel Reeves has unveiled her first Budget, with the Office for Budget Responsibility (OBR) accidentally publishing its assessment early in what the shadow chancellor called an 'outrageous' gaffe. Reeves described the leak as 'deeply disappointing' but pressed on with her statement, vowing to rebuild the economy and close the £22bn 'black hole' left by the Conservatives.
The key revenue-raising measure is a three-year freeze on income tax and national insurance thresholds from 2028, dragging millions into higher tax bands. Reeves admitted this would 'affect working people' but insisted the wealthiest would contribute most. The freeze is expected to cost families an extra £1,600 a year by 2029-30, according to the Institute for Fiscal Studies.
From April 2029, a £2,000 cap will be placed on pension contributions shielded from national insurance via salary sacrifice, raising £4.7bn. The annual Isa allowance will be cut from £20,000 to £12,000 from April 2027. A new 'mansion tax' will see properties worth over £2m face a £2,500 surcharge, rising to £7,500 for those over £5m.
Reeves confirmed no rises in headline rates of income tax, VAT or national insurance, arguing this keeps Labour's manifesto pledge. However, the threshold freeze and other changes mean overall tax burden will reach a record high. The OBR forecasts the Budget will boost public investment to a four-decade high but also slow economic growth in the short term.
