UK Budget Targets Wealthy With New Property and Investment Taxes
Chancellor Rachel Reeves delivered the 2025 United Kingdom Budget with a clear message: the richest households and high-income investors will shoulder a significantly larger share of the tax burden as the government seeks to stabilise public finances and fight inflation.
- Budget raises taxes mainly on wealthy households and investment income.
- Borrowing expected to fall and inflation to ease over the forecast period.
- UK growth upgraded to 1.5%, beating earlier predictions.
Reeves said the Budget is designed around “fair taxes”, arguing that after years of sluggish growth, the UK cannot afford to rely on austerity or broad-based tax hikes. Instead, she insisted the path to lower borrowing runs through fiscal tightening targeted at high-value property, investment income and sectors generating rapid revenue.
She also pointed to updated economic data to defend the strategy. The spring projections estimated UK growth at 1 percent this year, but the latest figures — released accidentally by the Office for Budget Responsibility (OBR) before the speech, prompting Reeves to call the leak “deeply disappointing” — show the economy expanding by 1.5 percent. “We said we would defy the predictions — and we did,” she told MPs.
Major tax increases
A broad package of new revenue measures was announced, including several aimed directly at wealthy households and investors:
- A surcharge on council tax for properties valued above £2 million, due from April 2028, expected to raise £400 million in 2029-30.
- Dividend and savings income tax rates will rise by 2 percentage points.
- Personal tax thresholds will remain frozen until April 2031, dragging more earners into higher brackets and raising an estimated £8.3 billion by the end of the forecast period.
- Salary sacrifice pension contributions capped at £2,000 per year before National Insurance applies.
- A 3p-per-mile charge for electric vehicles beginning 2028-29, forecast to generate £1.1 billion in its first year.
- The two-child benefit cap will be abolished, with a £3.5 billion annual increase to the welfare bill.
- Online gaming taxes will rise sharply — sports betting levy increasing from 15% to 25% and general gaming duty from 21% to 40% — raising a combined £1.1 billion.
Fiscal outlook
Reeves said the tax overhaul will ensure borrowing falls every year as a share of GDP, while also freeing space for targeted public-sector spending.
- Fiscal headroom stands at £22 billion — more than double the £9.9 billion available in March.
- Public debt is expected to decrease as a percentage of GDP by 2029-30.
- The government expects a return to a budget surplus by 2028-29, meaning day-to-day spending should be fully funded by revenues by the end of the decade.
She added that the inflation trajectory should improve as a result of “disciplined financing rather than unchecked spending,” arguing that a tighter Budget will lower price pressures rather than add to them.
Economic projections
The OBR forecasts incorporated into the Budget reflect both improved short-term momentum and lingering medium-term challenges:
- Growth of 1.5% in 2025, above earlier expectations — but slipping to 1.4% in 2026.
- Inflation is forecast at 3.5% in 2025, easing further to 2.5% in 2026.
- Productivity outlook remains weak at just 1% over the medium term, which may weigh on wages and living standards.
Pro-business measures
Away from taxation, Reeves signalled an effort to stimulate corporate activity:
- Widened eligibility for enterprise incentives to encourage business expansion.
- A new “UK listings relief” framework to attract more companies to float on London exchanges.
Mixed reception
Supporters of the Budget say it forces high-value property owners and wealthy investors to contribute more at a time when public finances remain severely stretched. Critics argue the combined impact of the mansion-tax surcharge, higher investment income taxes and pension limits could discourage high-skilled workers and slow the housing market at the top end.
But Reeves stood firm, saying the path to both stable prices and steady growth required “choices that benefit working families, not tax loopholes for the few.”
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