Autumn Budget 2025: Increased Tax, Increased Spending
Wednesday 26th November 2025 – 14:55 (GMT)
The 2025 Autumn Budget delivered one of the sharpest fiscal pivots in years, as Chancellor Rachel Reeves unveiled a package aimed squarely at rebuilding credibility with markets. The emphasis was clear: higher taxes now to secure borrowing discipline later – a message received with interest, if not enthusiasm, in the City.
Key tax measures included:
- Freeze on income-tax thresholds, deepening fiscal drag
- Higher levies on dividends and savings income
- Stricter limits on pension salary-sacrifice schemes
- New taxes on high-value property and mileage-based EV charges
On the spending side, Reeves coupled tax rises with targeted support. Public services receive top-ups while the two-child benefit cap is scrapped – a move signalling a shift toward easing pressure on lower-income households, albeit at higher long-term fiscal cost.
Market reaction was balanced. Gilt yields slipped as investors welcomed a firmer fiscal stance and sterling briefly found support on expectations that tighter public finances may stabilise the UK’s risk premium.
Yet the relief rally was short-lived, with traders quick to focus on softer growth projections. The OBR downgraded its growth projections, warning that the UK economy is expected to expand more slowly than previously forecast over the next five years.
For GBP, the Budget sets up a tug-of-war: improved fiscal credibility should lend support, but higher taxes and slower growth threaten to sap momentum. Analysts expect sterling to remain volatile with its direction hinging on whether the government can convert consolidation into confidence, without choking off economic recovery.