Budget 2025: What were the key measures announced by the Chancellor?

Rachel Reeves has now delivered the 2025 Budget, but thanks to a leak of the OBR report, we already knew many of the measures before she took to the Commons floor.

As the Chancellor has alluded to over the past few days, the policies announced included some progressive nuggets alongside some harder pills to swallow.

It’s been characterised as a make or break Budget, with Labour’s opinion polling sitting at historic lows as the party’s vote splinters in various directions.

Only the coming months and years will see it was enough to salvage Labour’s electoral fortunes. And more importantly, turn around the fortunes of the UK and its people. But here are the key measures announced in Rachel Reeves’ second Budget:

Income tax

The run up to the Budget was dominated by a “will they, won’t they” drama over whether the government would raise income tax – in violation of its flagship election promise last year.

While Rachel Reeves appeared to roll the pitch for tax rises in a pre-Budget speech earlier this month, an outright hike in income tax was subsequently ruled out.

However, the Budget did freeze income tax thresholds for a further three years, meaning they will not go up with inflation and effectively see more people pushed into higher tax rates over time.

Two-child cap abolished

One of the most despised Tory-era policies by Labour MPs and activists, the two-child cap was fiercely debated over the first few months of this parliament, with many hoping scrapping it would be one of the government’s first acts in power.

The policy only allows universal credit to be claimed for the first two children in a family – but this has driven up child poverty across the country.

Reeves has taken this Budget as an opportunity to close this saga, with the cap “within universal credit” to be scrapped from next April.

‘Mansion tax’

Council tax is one of the country’s most hated taxes, not least due to its regressive nature. As the Chancellor noted in her speech, properties in the same average Band D can end up paying vastly disparate rates.

While Reeves fell short of revising our decades-old council tax bands – or replacing the tax entirely – she did introduce a new surcharge on high value homes of more than £2 million and a further charge will be levied on those worth more than £5 million.

Changing rules for motorists

More and more people are now driving electric and hybrid vehicles as petrol and diesel cars get phased out.

Fuel duty is to be frozen until September 2026 – although as the combustion engine becomes a thing of the past, this revenue is expected to dwindle.

Instead, a new mileage-based tax for electric and hybrid vehicles will be brought in to reflect this new reality.

And for those who prefer to take the train instead, rail fares are being frozen for the first time since 1996.

Gambling tax

In a measure championed by Gordon Brown, Rachel Reeves announced reforms to gambling taxes at the Budget.

The policy is aimed squarely at online gambling, which will see remote gaming duty raised from 21% to 40% – although this does not apply to in-person gambling and horse racing.

Minimum wage rise

A rise to the National Minimum Wage and National Living Wage was announced yesterday ahead of the Budget, which was confirmed during the Chancellor’s speech today.

The National Living Wage will rise by 4.1% to £12.71 per hour for those aged 21 and over from April. The National Minimum Wage for 18-20 year-olds will also rise by 8.5% to £10.85 per hour.

Also in the Budget

Other measures announced included:

• Tourism tax powers handed over to local and regional mayors
• NHS prescription costs in England frozen for another year
• Sugary drinks tax to be applied to milkshakes and lattes
• Changes to ISA allowances to encourage more people to invest in stocks and shares
• £2,000 cap on salary sacrifice schemes that pay into pensions

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