Budget 2029-30: Reeves freezes tax thresholds, targets wealthy households with new levies as cost-of-living measures edge forward

Chancellor Rachel Reeves presented a Budget aimed at stabilizing public finances while addressing the cost of living. The plan relies on targeted tax changes rather than sweeping rate hikes, promising fairness and stronger public services.

Key fiscal measures

• Income tax and National Insurance thresholds frozen for three more years, extending the freeze to 2031 across England, Wales and Northern Ireland.
• Homes valued above £2 million will face a new annual levy of £2,500, rising to £7,500 on properties worth £5 million, payable on top of council tax from April 2028.
• New charges on plug-in vehicles: 3p per mile for electric cars and 1.5p per mile for plug-in hybrids.
• Online betting duty increases from 15% to 25% to target online wagering losses.
• A cap of £2,000 per year on pension contributions made through salary sacrifice schemes without triggering National Insurance contributions.

In place of tax rate hikes, the Budget relies on dozens of smaller measures and threshold freezes, which Reeves says keep main rates unchanged while broadening the tax base.

Projections from the Office for Budget Responsibility show £26 billion in extra tax revenue in 2029-30, sending the tax take to a record high of about 38% of national income by 2030-31. The forecast also signals slower growth in the coming years.

Beyond the numbers: living costs and policies

The Government ends the two-child cap on tax credits and universal credit from April next year, a move Labour says will lift around 450,000 children out of poverty, though the measure does not touch the child benefit itself.

Green levies on electricity will be removed, potentially saving households around £150 a year. Other reliefs include a freeze on prescription charges and limited rail fare reductions in England.

Public debt is projected to shrink as a share of the economy, and headroom to weather future shocks will rise to about £21.7 billion, offering some market reassurance.

Reaction and analysis

Critics from the Conservative Party accused Reeves of breaking promises not to raise taxes again and called for her resignation. Liberal Democrats and Green Party leaders pressed for bolder reforms to address inequality and growth, while the SNP argued the Budget falls short of Scotland’s needs.

Markets initially dipped as the forecast leaked before the Budget, but the pound recovered after an orderly release and reassurances on fiscal discipline.

Expert view

Expert note: Tax policy analyst Dr. Maya Chen notes the plan shifts more expense onto wealthier households and asset values, with growth risks if the economy slows. Still, Reeves emphasizes a careful path away from austerity and toward sustainable public services.

Key takeaways

• Threshold freezes extend through 2031, expanding the number of taxpayers affected.
• High-value homes face new annual charges; the levy scales with property value.
• Electric vehicles face a new per-mile charge; online betting duties rise.
• Salary sacrifice pension contributions face an annual cap, limiting NI savings.
• The two-child cap is scrapped for tax credits; green levies on bills are removed.

Summary

The Budget seeks to balance fairness and stability by avoiding major rate changes while widening the tax base with targeted levies and threshold freezes. It aims to protect essential public services, curb debt growth, and support families facing higher living costs. Reactions across parties highlight a divided view on fairness and growth, with markets showing cautious optimism after the initial volatility.

Key insight: The Budget leans on wealthier households and asset values to fund public services without raising core tax rates, signaling a careful path to fiscal stability. Source