Yesterday, Rachel Reeves announced some new changes to the UK’s fiscal landscape. We will go through the headline changes below:
Mansion Tax
Any home above the value of £2 million will have an additional council tax (dubbed a ‘mansion tax’) of at least £2,500 a year. If the value of the home is above £5 million then the yearly charge will be upwards of £7,500. It will hit approximately 100,000 homes, primarily in London and the South East. It will require a new valuation for some homes in the most expensive council tax bands (F, G and H).
Cash ISAs
Moving forwards, the yearly allowance for Cash ISAs will drop from £20,000 a year to £12,000 a year for those aged under 65. There will still be an overall allocation of £20,000, so for pre-retirees they must put their remaining £8,000 into a stocks and shares ISA. The reasoning behind this is two-fold; stocks and shares generally get higher returns than Cash over time, and so is better for the saver; additionally, this will also direct some money into the UK stock market, which will help the economy’s growth.
Increase on Savings and Property Rental Tax
From April 2027, there will be a 2% increase to the basic, higher and additional rates of savings income tax. They will increase to 22%, 42% and 47% respectively. Most people will not save enough to pay an income tax on savings, but it will make the system more complicated. This increase will also apply to any income earning through property.
Two-Child Benefit Cap
From April 2026, the two-child benefit cap will be lifted, allowing those with three or children to claim additional Universal Credit. Labour have claimed this will mean that 450,000 children will no longer be living in poverty by 2030.
Electric Vehicles
Electric vehicles will have a 3p per mile charge from April 2028. As they are road users, this is deemed only fair as they have stopped paying the fuel charge. Plug-in hybrid cars will have a charge of 1.5p per mile. An average car user drives 10,000 a year, meaning a total charge of £300, or £25 a month. These rates are due to increase each year in line with inflation, although it hasn’t yet been made clear how they will be collected.
Fuel Duty
The 5p ‘temporary’ cut in fuel duty on petrol and diesel is extended again, up until September 2026, when it will then rise over a six month period.
Salary Sacrifice
The amount that people can sacrifice from their salary that will be free of national Insurances payments will be capped at £2,000 a year from 2029. Salary sacrifice allows payments into a pension from your earnings, without you or your employer paying National Insurance on the contributions. The cap will mean the government recoups more from those that were paying large amounts into their pensions via salary sacrifice.
