LONDON (Reuters) -British finance minister Rachel Reeves delivered her budget statement to parliament on Wednesday, taking more tax from workers, people saving for a pension and from investors to give herself more room to meet her borrowing targets.
Reeves’ speech came after the Office for Budget Responsibility unexpectedly published its outlook on its website ahead of Reeves’ delivering her budget. It later apologised for what it described as a “technical error”.
Below are the key measures she announced:
INCOME TAX THRESHOLD FREEZE
Britain will freeze the thresholds for paying income tax for three further years from 2028, Reeves said, with the move expected to raise 7.6 billion pounds in 2029/30.
NEW TAX ON EXPENSIVE HOMES
Reeves will introduce a new high-value council tax surcharge in England starting in 2028, with an annual charge of 2,500 pounds for properties valued over 2 million pounds, increasing to 7,500 pounds for properties worth more than 5 million pounds.
This will be collected alongside council tax and is expected to raise over 400 million pounds by 2031 and will be charged on fewer than the top 1% of properties.
FREEZE ON FUEL DUTY RATES
Britain will maintain a freeze on the level of fuel duty rates. Reeves said the temporary 5 pence cut to fuel duty introduced during the COVID-19 pandemic, which will come to an end in April next year, will be extended until September 2026. Successive governments have kept fuel duty frozen since 2011, fearful of protests by drivers. The duty is a big revenue-raiser, bringing in around 25 billion pounds a year.
TWO-CHILD WELFARE CAP
The two-child limit on welfare payments will be removed from April, Reeves said. The two-child welfare cap, introduced by the Conservative government in 2017, means many low-income families do not receive further benefits when they have a third child or subsequent children.
The OBR said scrapping the cap would cost about 3 billion pounds in 2029-30.
NEW ELECTRIC CARS CHARGE
A new mileage-based charge for electric and plug-in hybrid vehicles would take effect in April 2028, a measure expected to raise 1.4 billion pounds. The OBR said the new levy was intended to offset roughly a quarter of the 0.6% of GDP in revenue expected to be lost from fuel duty by 2050 due to the shift to electric vehicles. It would be set at about half the fuel duty rate currently paid by petrol car drivers.
Reeves said the mileage tax for electric vehicles would be 3 pence per mile, while plug-in hybrid cars will incur a charge of 1.5 pence per mile.