Chancellor Rachel Reeves has presented a massive budget that will raise taxes by £26 billion, pushing the UK tax burden to a record 38% of GDP by the end of the term. The package has also been hit by weaker productivity forecasts and rising welfare costs, according to an OBR document accidentally published before the speech.
The biggest move in the budget is a freeze on end-of-year income tax until 2030–31, which is expected to generate £8.3 billion a year. The OBR also estimates that the budget will increase Reeves’ fiscal space to £22 billion, more than double the level in March.
Reeves also tightened the pension scheme, introduced a new charge on electric cars, reformed gambling tax, and a council tax surcharge on luxury homes worth more than £2 million. A dividend tax hike in 2026 is expected to raise an additional £1.2 billion a year.
The budget comes as the UK economy faces slowing growth, inflation remains the highest in the G7 and youth unemployment is rising.
While Reeves insists he will not practice excessive austerity or borrowing, analysts warn that the government must show a clear deficit reduction within two years to ensure fiscal credibility remains intact.
