Rachel Reeves’s 2024 Budget: Tax, Benefit and Wage Reforms

In the November 2024 Budget, Chancellor Rachel Reeves introduced a suite of fiscal measures aimed at raising revenue, easing living costs for low-paid workers and reshaping the benefits system. The package combined tax threshold freezes, extensions of fuel-duty cuts, a new “mansion tax,” the removal of the two-child benefit cap, and a scheduled rise in the National Living Wage from April 1 2026.

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Reeves confirmed that the income-tax threshold of £12,570 would remain frozen until 2031, postponing the scheduled unfreeze in 2028. By keeping the threshold static while wages and pensions rise, the policy creates “fiscal drag,” pulling millions of earners—and, from 2027, many state pensioners—into the 20 % tax band. Deputy Mayor Andy Burnham publicly pledged that pensioners whose sole income is the state pension would be protected from this effect.

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The Budget continued the fuel-duty freeze for a fifteenth consecutive year, retaining a 5-pence per litre cut through September 2026 and later extending the freeze to 31 December. In parallel, Reeves unveiled a high-value council-tax surcharge on homes valued over £2 million (£2,500) and over £5 million (£7,500). The chancellor estimated the “mansion tax” would generate about £400 million a year by 2029-30.

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Reeves scrapped the controversial two-child cap on Universal Credit and tax credits, a rule introduced in 2017. The Office for Budget Responsibility (OBR) projected that eliminating the cap could reduce child poverty by roughly 450,000 children by 2029/30.

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The Budget set a 4.1 % increase to the National Living Wage, lifting it to £12.71 per hour for workers aged 21 and over from April 1 2026. The National Minimum Wage for 18- to 20-year-olds will rise 8.5 % to £10.85 per hour. The chancellor’s calculations indicated the changes would benefit around 2.4 million low-paid workers.

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