The Chancellor has announced a raft of new tax changes and financial reforms in her Budget that will aim to raise £26bn by the 2029/30 tax year.

Delivering her second Budget under the Labour Government, Rachel Reeves confirmed changes to income tax personal allowances, tax rates on dividends and property income, salary-sacrificed pension contributions, as well as reforms to the way ISAs work.

Following weeks of speculation, the Chancellor announced she will cut the tax-free cash ISA allowance to £12,000. The £20,000 tax-free threshold on all ISAs is to remain, although £8,000 of this will be exclusively for stocks and shares investment from 2027. Over-65s will retain the full cash allowance, however, the Chancellor confirmed.

Reeves also confirmed the introduction of a £2,000 cap on salary sacrifice into pensions, with contributions above this level to be taxed at the same rate as other pension contributions, a move estimated to raise £4.7bn in 2029/30.

Income tax thresholds will be frozen in place for another three years to 2030/31, the Chancellor also announced, meaning more people will pay higher rates.

She has also announced a council tax surcharge, or “mansion tax”, for homes worth more than £2m. Reeves said she would increase the tax paid on dividend income by two percentage points and that she is introducing a new charge for properties worth more than £2m.

On inheritance tax (IHT), a significant theme in last year’s Budget, Reeves this time announced that she will exempt compensation payments for the Infected Blood Scheme, “regardless of the circumstances in which those payments are passed down”.

The Office for Budget Responsibility (OBR), which accidentally leaked its report before Reeves delivered her speech to the House, has estimated that the UK’s GDP will grow by 1.5% over the next five years, although this is 0.3% slower than previously forecast in March.

It said that lower GDP growth, coupled with higher forecast inflation, wages, receipts, and spending, has resulted in a “modest deterioration in the pre-measures fiscal position”.

Elsewhere in the Budget, Reeves also detailed plans for a mileage charge for electric vehicles, an extended freeze on fuel duty, while the two-child cap on means-tested benefits will be lifted.

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