Chancellor Rachel Reeves has delivered a bruising second Budget, confirming more than £30 billion in tax rises and abandoning earlier assurances that “working people” would be shielded from higher taxes.
Instead, she told MPs she was asking “everyone to contribute”, with most households now set to be worse off and middle-income families bearing the brunt.
While welfare payments, pensions and minimum wages will rise, a broad package of tax increases — combined with frozen thresholds — means millions will see their disposable income fall further. Business owners have criticised the plans, with some dubbing it a “Budget for benefits”.
Below, a breakdown of how different groups will be affected.
Who loses out
Workers using salary sacrifice
One of the most significant changes is the cap on National Insurance relief for salary-sacrificed pension contributions. From April 2029, only the first £2,000 of annual contributions will be exempt — a sharp shift from the current unlimited allowance.
For someone earning £50,000 and contributing 5%, this equates to an estimated £75 a year in additional tax; for a £100,000 earner, around £450. Employers, who also lose NI relief, face even greater costs and may respond by lowering their own pension contributions.
Pension specialists warn of long-term consequences. Hargreaves Lansdown calculates that a 22-year-old earning £25,000 could retire with £57,000 less if employer contributions stagnate as a result of the change.
Earners hit by frozen thresholds
Reeves has extended the freeze on income tax thresholds until 2031, pulling more workers into higher tax bands as wages rise. This also drags more estates into inheritance tax and more gains into capital gains tax.
According to analysis, a worker on £50,000 this year will pay £8,165 more in tax between 2020 and 2031 due to the frozen bands.
Owners of high-value property
Homes in England worth over £2 million will face a new surcharge of between £2,500 and £7,500 a year. The charge, uprated annually with inflation, affects around 100,000 homeowners but is expected to have wider effects.
To administer the levy, the Chancellor is ordering a revaluation of Bands F–H, raising concerns that many homes last valued in 1991 will be pushed into higher council tax bands. Property analysts warn it may destabilise a market already under pressure while the government attempts to build 1.5 million new homes.
Drinkers, smokers and gamblers
Alcohol duties will rise in February in line with the RPI measure of inflation — adding 13p to a bottle of wine, 11p to Prosecco and 38p to gin. Tobacco duty will rise above inflation, and a new vape duty remains scheduled.
The gambling sector faces one of the steepest hits. Tax on online gaming profits rises from 21% to 40%, and online betting duty jumps from 15% to 25%, though bingo duty is abolished.
Savers and investors
The cash ISA allowance will be capped at £12,000 for under-65s from April 2027, with £8,000 of the £20,000 allowance ring-fenced for investments. The Chancellor has also raised tax on dividends, savings income and property income by two percentage points, saying it is “not fair” for investment income to attract lower rates than earnings.
Industry leaders called the ISA change a blow to financial confidence at a time when households are trying to build savings buffers.
Motorists — especially EV drivers
Electric vehicle owners will face a new 3p-per-mile road charge from 2028 to replace lost fuel-duty revenue.
Meanwhile, petrol and diesel drivers gain a temporary reprieve: the 5p fuel duty cut is extended until September 2026, before being phased out gradually.
Holidaymakers
Mayors in England will be given powers to introduce a tourist tax on overnight stays. The levy is expected to be around £1 per night, though councils will have flexibility over the final design.
Who gains
Large low-income families
Reeves has scrapped the two-child benefit cap, handing substantial increases to larger low-income families. The OBR estimates 560,000 families will benefit, with around 18,000 households gaining more than £14,000 per year.
Universal Credit, PIP, child benefit and other working-age benefits will rise by 3.8% in April. Free school meals will expand to all households on Universal Credit in 2026, and the Help to Save scheme will become permanent.
Low-paid workers
The National Living Wage rises to £12.72 an hour, delivering an annual boost of around £700 for a full-time employee. The rise forms part of a longer-term plan to introduce a single adult wage rate from age 18.
Train passengers
Regulated rail fares have been frozen for 2025, the first across-the-board freeze since 1996. Labour claims that commuters on certain routes will save more than £300 a year.
State pensioners
The state pension rises by 4.8% under the triple lock, adding £550 a year to the full new state pension. Some retirees under the old scheme will gain £440. However, further increases could push pensioners paying no tax today over the £12,570 personal allowance, creating new tax liabilities.
Households facing high energy bills
Reeves says an average household will save £150 a year after she scrapped a Conservative-era eco levy she claims added £1.7 billion annually to bills.
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Reeves unveils £30bn tax rise as Budget leaves millions worse off and middle earners hit hardest