Londoners will bear the brunt of the Chancellor’s multi-billion pound Budget tax raid with the owners of expensive homes and thousands of workers being clobbered by tax rises.
Rachel Reeves announced tax rises amounting to £26billion as she battles a downgrade in forecast to Britain’s economic growth.
She also confirmed a series of measures aimed at helping people who are struggling with living costs, including the long-expected end to the two-child benefits cap, a £150 energy bill cut for average households and a hike in the minimum wage.
Income Tax
While National Insurance, Income Tax or VAT will not be increasing, more than 1.7 million people will still face paying more as Ms Reeves said thresholds will be frozen.
This means more workers will be dragged into paying the tax for the first time or shifted into higher bands as earnings rise. The measures contribute to a tax burden that will increase to an "all-time high" in 2030/31.
The 20% basic rate of income tax is paid on income from £12,571 to £50,270, and the 40% higher rate on income from £50,271 to £125,140.
In London, there are due to be 700,000 more higher rate payers by 2027/28 under the six-year freeze initiated by the previous Conservative government, with a further 110,000 now the policy has been extended for another two years - a total of 810,000.
There would also be 400,000 more basic rate payers by 2027/28 in the capital, and a further 60,000 by 2029/30, according to figures from the House of Commons Library.
London Property Taxes
From 2028, a £2,500 annual levy will be added to the bills of people living in homes in the highest council tax worth more than £2million, the majority of which are in London and the South East.
Ms Reeves insisted the so-called mansion tax was to make property payments fairer across the country.
“I will take further steps to deal with a longstanding source of wealth inequality in our country,” Ms Reeves told the Commons.
“Currently, a Band D home in Darlington or Blackpool pays just under £2,400 in council tax nearly £300 more than a £10m mansion in Mayfair.
“And so from 2028, I am introducing the High Value Council Tax Surcharge in England.
“An annual £2,500 charge for properties worth more than £2m, rising to £7,500 for properties worth more than £5m. This will be collected alongside council tax, levied on owners and we will consult on options for support or deferral. This new surcharge will raise over £400m by 2031 and will be charged on fewer than the top 1% of properties.”
Renters and Landlords
The 2.7 million private renters in London will be more protected from payment increases and evictions under reforms set to come into force on May 1, 2026.
Landlords will also be hit with higher taxes. Ms Reeves told the Commons: "It's not fair that the tax system treats different types of income so differently, and so I will increase the basic and higher rate of tax on property savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points."
But renters' rights groups condemned the Chancellor’s refusal to increase local housing allowance.
Tom Darling, Director at the Renters' Reform Coalition, said: "Overall, this is not a renters' budget - the continued freezing of housing benefit means tenants on low incomes will continue to struggle to keep a roof over their head while paying for the essentials.
“Soaring rents are a major cause of homelessness, driving renters out of their homes or into poverty, and refusing to increase housing allowance means many families will remain trapped in emergency homelessness accommodation, unable to afford to move."
Family Benefits
Nearly 1.5 million children in England, including 260,000 in London, will benefit from the lifting of the two-child welfare cap at a cost of £3 billion.
The capital sees the most youngsters whose families will gain more benefits compared to any other region.
In Newham alone, 15,910 children will benefit from the axing of the cap, according to figures from the Department for Work and Pensions, in Hackney 15,740 and in Tower Hamlets 15,520.
Minimum Wage
Hundreds of thousands of workers in London on the National Living Wage will get a pay boost next April.
Ms Reeves confirmed the Minimum Wage would be increasing by 4.1 per cent to £12.71 an hour for workers aged 21 and over.
But hospitality chiefs are warning that the NLW rise will cause more difficulties for many pubs, hotels, cafes and clubs already under huge financial pressure.
Energy Bills
The average household will see a £150 cut to their energy bill from April, Ms Reeves said.
She told the Commons: "The Conservatives' ECO (energy company obligation) scheme was presented as a plan to tackle fuel poverty.
“It costs households £1.7 billion a year on their bills and for 97% of families in fuel poverty, the scheme has cost them more than it has saved. It is a failed scheme. "So, I am scrapping that scheme along with taking other legacy costs off bills.
“And as a result, I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 cut from the average household energy bill from April.
"Money off bills, and in the pockets of working people. That is my choice. Not to neglect Britain's energy security, like the Tories did. Not to leave working families to bear the brunt of high prices, like the Tories did. But to get energy costs down now and in the years to come. That is the Labour choice."
