UK’s Treasury chief sets out 2nd budget with tax rises, welfare changes

LONDON

UK’s Treasury chief Rachel Reeves has delivered her second budget, outlining a series of tax increases, welfare reforms and cost-of-living measures, after several proposals were released early by the country’s fiscal watchdog.

Reeves confirmed on Wednesday that thresholds for income tax and National Insurance will remain frozen for an additional three years beyond 2028, a move expected to push more workers into higher tax brackets.

Tax rates on property, savings and dividend income will rise by two percentage points.

She also announced a 4.1% rise in the UK’s legal minimum wage for over-21s from April, while younger adults will see an 8.5% uplift as the government moves toward a single adult rate.

Basic and new state pensions will increase by 4.8% under the “triple lock.”

The cap preventing low-income households from claiming benefits for a third or subsequent child will be scrapped.

Fuel duty will remain frozen for five months after April, before a staged rise from 2026, and a mileage-based tax for electric and plug-in hybrid vehicles will begin in 2028.

Other changes include extending the tax on sugary drinks to pre-packaged milkshakes and lattes from 2028, freezing NHS prescription charges in England, and giving English regional mayors powers to tax overnight hotel stays.

The UK’s fiscal watchdog expects economic growth to reach 1.5% this year, with inflation forecast to return to the 2% target in 2027.