Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves introduced a series of significant tax and fiscal policies during their tenure, resulting in considerable financial impacts across the United Kingdom. Their administration, which came to power pledging economic competence and stability, faced immediate challenges that critics say undermined their credibility and worsened public sentiment.

Among the early controversies was the plan to remove the Winter Fuel Payment for all but the poorest pensioners. This move sparked widespread backlash and was eventually reversed, with the benefit restored for most pensioners and limited only to those earning above £35,000. Despite the reversal, the episode was viewed as damaging to the government’s reputation.

A key component of Reeves’s fiscal approach has been the extension of frozen income tax thresholds until 2031—a policy initially introduced by the previous Conservative government. By maintaining static tax bands while wages rise, an increasing number of taxpayers are pushed into higher tax brackets or forced to pay more tax, effectively raising the tax burden through “stealth” inflation. Analysts estimate that individuals earning £75,000 annually could pay nearly £4,800 more in tax by the end of this period compared to if thresholds had kept pace with inflation.

Employers have also faced higher costs under this administration. The employer National Insurance rate was increased from 13.8% to 15%, with the threshold for contributions lowered from £9,100 to £5,000. Coupled with an increase in the National Living Wage, these measures are estimated to have added nearly £2,400 to the annual cost of employing a full-time minimum wage worker. Critics argue this has contributed to rising unemployment and squeezed business profitability.

Investors and savers experienced several tax increases during these budgets. Capital gains tax rates rose in October 2024, followed by an increase in dividend tax rates by two percentage points from April 2026. Further planned rises in savings and property income tax rates are set to take effect in April 2027. These changes have heightened the importance of tax-efficient investment vehicles such as ISAs and pensions.

From the same date, unused defined contribution pension pots will be subject to inheritance tax, complicating estate planning and potentially increasing administrative burdens. Additionally, starting in April 2029, National Insurance savings from pension salary sacrifice schemes will be capped at £2,000 per year, impacting an estimated 3.3 million workplace pension savers and potentially leading to reduced pension contributions and higher costs for employers.

Uncertainty around pension tax relief and tax-free cash has also been a source of concern. The chancellor did not provide firm assurances on maintaining existing rules, leading some savers to withdraw funds prematurely amid fears of impending changes.

Attempts to simplify ISAs have instead added complexity, with new limits for Cash ISAs introduced for individuals under 65, and tax applied to cash held in Stocks and Shares ISAs pending investment from April 2027. These reforms have raised concerns that the added complexity may discourage investment.

With Andy Burnham poised to succeed Starmer as prime minister on July 17 and expected to appoint a new chancellor, the future direction of these policies remains uncertain. However, analysts indicate that many of the tax and pension changes implemented under Starmer and Reeves are likely to persist, continuing to influence household finances and economic conditions across the UK.