Rachel Reeves’ Budget made headlines for all the wrong reasons after leaking hours early, but even with the surprise spoiled, the message remained the same: tax rises are coming — and most households and small businesses will feel them.
Here’s our friendly, no-nonsense breakdown of what matters for you.
Why Taxes Are Going Up
The Government says it inherited a difficult financial landscape: low productivity, weakening public services and rising interest costs on national debt. A sudden downgrade in the UK’s economic outlook added billions to the deficit, leaving ministers with limited choices. Instead of borrowing more or cutting public spending, they opted for £26 billion in new taxes over the next few years.
The Big Stealth Tax: Frozen Thresholds
One of the most significant changes is also one of the quietest: income tax thresholds will stay frozen until 2031.
This sounds harmless, but as wages rise with inflation, more people slip into higher tax bands without earning more in real terms.
By the end of the decade:
- Around 1.7 million people will be dragged into higher tax brackets
- Take-home pay won’t keep pace with rising living costs
- Small business owners paying themselves through salary + dividends will feel it sharply
This will be one of the most noticeable pressures on working-age households.
Landlords, Savers and Shareholders Face Extra Pressure
From 2027, tax on rental income, dividends and savings interest rises by two percentage points. The Government argues this improves “fairness,” but it does mean lower net returns for clients with property portfolios or investment income.
The ISA rules also change. If you’re under 65, your annual cash ISA allowance drops from £20,000 to £12,000, while those 65 and over keep the full allowance. It’s an unusual split and one that younger savers will want to plan around.
Property Taxes: Not Just for Millionaires
A new annual charge will apply to homes worth over £2 million from 2028. Although described as a “mansion tax,” it’s likely to affect many long-time homeowners in London and the South East whose properties have risen sharply in value.
- £2,500 a year for homes worth £2–2.5m
- Up to £7,500 for homes over £5m
For households who are asset-rich but income-modest, this will feel particularly tough.
Drivers Hit From Both Sides
Whether you drive electric or petrol, the cost of being on the road is going up.
- EV owners will pay 3p per mile from 2028
- Fuel duty rises again from 2027
- The temporary 5p cut for petrol/diesel will be reversed beforehand
Anyone who switched to an EV to cut costs will understandably feel frustrated by this change.
One Bright Spot: The End of the Two-Child Cap
Among the tougher measures, there is one overwhelmingly positive reform. From April 2026, the controversial two-child benefit cap will be abolished, lifting an estimated 450,000 children out of poverty. For families who have struggled in recent years, this will be genuinely life-changing.
Small Businesses: Still Under Strain
For the clients we support — from shop owners to tradespeople to consultants — this Budget will feel like more of the same. Costs continue to rise, with higher minimum wage levels and increased dividend taxes putting pressure on margins.
There is at least one welcome change: permanent business rates relief for retail, hospitality and leisure, along with higher rates for large online warehouses. This should help level the playing field between the high street and e-commerce giants.
Who’s Protected — And Who Isn’t
The generational split is hard to miss.
Pensioners remain well protected through the triple lock, frozen prescription charges and the full ISA allowance. Working-age people, however, face a combination of threshold freezes, rising taxes on investment income and higher everyday costs.
And because many of the biggest tax increases only take effect after 2027, the sharpest impact is still a few years away.
What You May Want to Do Now
A few sensible steps for planning ahead:
- If you’re under 65, make full use of the current £20,000 ISA limit before it drops
- Landlords should refresh cashflow forecasts well before 2027
- Small business owners may want to rethink dividend planning and prepare for higher wage bills
- Higher-rate earners can explore pension contributions and salary-sacrifice arrangements to offset fiscal drag
We can help you run the numbers for any of these.
If you’d like us to walk through how these changes affect your personal situation or your business, just reach out — we’re here to guide you through the squeeze with clarity and confidence.