The Mirror rounds up all the key measures from Rachel Reeves’ Budget and how they will affect you and your money
Rachel Reeves has finally delivered her Budget – with £26million worth of tax rises that will affect millions of workers.
She said: “I am asking everyone to make a contribution, but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer and to ensure the wealthiest contribute the most.”
Other measures announced in the Budget, which were accidentally leaked by the Office for Budget Responsibility (OBR) ahead of her speech in the House of Commons, also included big changes for savers and the scrapping of the two-child benefit cap.
The Mirror rounds up all the key measures and how they will affect you and your money.
What it means … for your taxes
The tax thresholds are being frozen for an additional three years. What this means is, millions of workers will end up paying more in tax as their wages increase. This is a process known as “fiscal drag”.
It is also described as a stealth tax, as it is a way for the government to collect more tax without actually putting up the rate of tax that people are paying.
The income tax personal allowance, which is how much you can earn before you start to pay tax, is set at £12,570. This was meant to be frozen until April 2028 but this freeze will now be extended until April 2031.
You pay the 20% basic rate of tax on earnings above £12,570, then the 40% higher rate of tax on earnings above £50,270, and the 45% additional rate on earnings above £125,140. The Chancellor did not put up the rates of tax.
What it means… for your wages
The minimum wage is set to increase from April next year. For workers aged 21 and over, the minimum wage will rise by 4.1% to £12.71 an hour.
The minimum wage rate for 18 to 20-year-olds will increase by 8.5% to £10.85 an hour, and the minimum wage for 16 to 17-year-olds and those on apprenticeships will increase by 6% to £8 an hour.
The increases will benefit a total of 2.7 million young and older workers, said the Government.
What it means… for your savings
The big news for savers is that the Chancellor has confirmed that the cash ISA limit is being cut, following months of speculation. However, this will only affect under-65s. An ISA is a type of account where any savings interest you earn is always tax-free.
The annual cash ISA limit is being slashed from £20,000 to £12,000 from April 2027. There will still be an overall £20,000 ISA limit, so it means you could save £12,000 into a cash ISA and £8,000 into a stocks and shares ISA.
The Chancellor has also revealed that the rate of tax paid on savings interest for other accounts is going to rise. If you’re a basic-rate taxpayer, you can earn £1,000 in savings interest before you start to pay tax.
You pay 20% tax on anything earned in savings interest above this threshold – but this will rise to 22% from April 2027. Higher-rate taxpayers pay 40% tax when they earn more than £500 in savings interest a year. This will go up to 42%.
Additional rate taxpayers have to pay 45% tax on all their savings interest, as they don’t get any tax-free allowance. This will rise to 47% tax.
What it means… for your pension
The state pension is going up, but the Chancellor has announced big changes to salary sacrifice schemes which will impact workers saving for their pension.
The state pension will increase by 4.8% from next April. The state pension rises every year in line with the triple lock. It means the full new state pension will increase from £230.25 a week to £241.30 a week in April 2026 – an increase of almost £575 a year.
However, millions of pensioners are being dragged closer into paying tax on their state pension income for the first time.
This is because the new full state pension is only just below the £12,570 personal allowance. In her Budget, the Chancellor revealed people who are “only in receipt of the basic or new state pension” will not have to “pay small amounts of tax through Simple Assessment”.
No further details have been announced about how this will work yet. If you make pension contributions through a salary sacrifice scheme, there will be a new £2,000 yearly cap from April 2029.
It means pension contributions from salary sacrifice schemes that go above the £2,000 yearly threshold will no longer be exempt from National Insurance.
What it means… if you claim benefits
The two-child benefit cap is being axed from April 2026. The two-child benefit cap means low-income families cannot claim further means-tested benefits when they have a third or subsequent child born after April 6, 2017.
This affects people claiming Universal Credit and Tax Credits. A total of 1,665,540 children were impacted by the two-child benefit cap in April 2025, according to the Department for Work and Pensions (DWP).
Benefit payments including Universal Credit will also rise next April. Most welfare payments normally increase every April in line with the previous September rate of inflation – however, the Universal Credit standard allowance will go up by an even bigger amount.
The standard allowance will increase from £92 to £98 a week for a single person aged 25 and over, and from £145 to £154 per week for couples.
But the Motability scheme will be reformed to remove luxury vehicles. Motability is a scheme that allows people with a qualifying disability benefit to exchange their allowance for a leased vehicle.
What it means… for cost of living
There was only really one announcement that promised to lower household bills. The Chancellor said she will cut £150 from the average energy bill from next year by scrapping the Energy Company Obligation scheme.
Other measures that could save people money include freezing the cost of an NHS prescription at £9.90 next year. Rail fares have also been frozen until 2027, in good news for commuters.
But people in expensive homes could pay more for council tax. Anyone who lives in a home valued at £2million or more in England will face a new surcharge from April 2028.
What it means… for drivers
The 5p per litre cut in fuel duty is being extended until the end of August 2026 – after this, rates will then gradually return to March 2022 levels by March 2027.
This is good news for drivers for now, but it means prices at the pump will likely go up when the 5p cut is tapered away. Fuel duty is a tax on road fuels, heating oils, and other fuels and it is included in the pump price for petrol and diesel.
Rachel Reeves has also announced that from April 2028, drivers of battery electric cars will be hit by a 3p per mile tax, while drivers of plug-in hybrids will be charged 1.5p per mile.
The average EV driver will pay about £240 per year, according to the Treasury.
What it means… for smokers and drinkers
The price of smoking and drinking continues will become even more expensive after the Budget.
Tobacco duty, which is passed down into what you pay in the shop, will rise by RPI inflation plus two percentage points from 6pm today.
Alcohol duty will rise in line with RPI inflation, with the increase set to kick in from February next year. Most alcohol duty rates increased by RPI at 3.6% this February.
What it means… for first-time buyers
The government will consult on reforming the Lifetime ISA and the possibility of replacing it with a new product for first-time buyers.
The Lifetime ISA is a type of savings account where the government gives you a 25% bonus on your savings. You can save up to £4,000 each tax year into a Lifetime ISA – so the maximum bonus you can get each year is £1,000.
But you can only use this product for your first home or retirement. If you access your funds for any other reason, you face a a 25% withdrawal penalty which not only wipes out the bonus, but also part of your original savings.
Martin Lewis has been calling on the government to overhaul the fine, and to raise the property threshold for the Lifetime ISA. You can only use the Lifetime ISA if you’re buying a home worth under £450,000.