Millions of households across the United Kingdom are set to face a series of tax increases from next year, as Chancellor Rachel Reeves confirms a raft of measures outlined in the recent Autumn Budget.
Key Changes to Fuel and Alcohol Duties
One of the most significant changes will see the end of a temporary relief for drivers. The 5p per litre cut to fuel duty, first introduced in March 2022, will conclude on 22 March 2026. This measure was initially brought in to help with soaring living costs and high oil prices. Its expiry means motorists will pay more to keep their vehicles on the road.
Meanwhile, the duty on alcohol is also scheduled to rise. From 1 February 2026, alcohol duty will increase in line with Retail Price Index (RPI) inflation. The government states this aims to maintain the duty's real-terms value, balancing economic contributions with public health considerations. The Wine and Spirit Trade Association's chief executive, Miles Beale, criticised the move as "disappointing and shortsighted."
New Taxes and Increased Rates
A brand new levy, the Vaping Products Duty (VPD), will be introduced. This excise duty will apply to nicotine-containing vaping liquids and will be charged at a flat rate of £2.20 per 10 millilitres of liquid, regardless of nicotine content.
Investors and business owners will also feel a pinch. From April 2026, the basic and higher rates of dividend tax will each rise by two percentage points. The basic rate will jump from 8.75% to 10.75%, while the higher rate increases from 33.75% to 35.75%. This change affects limited company owners and those relying on dividend income.
In a move welcomed by the National Farmers' Union (NFU), the government has offered some relief on inheritance tax for agricultural businesses. Following a sustained campaign, the threshold for relief will be raised to £2.5 million from April 2026, up from the planned £1 million. NFU President Tom Bradshaw called it a "huge relief" for many family farms.
Luxury Car Tax and Frozen Thresholds
The so-called "luxury car tax" – an additional Vehicle Excise Duty (VED) supplement – will continue to apply. Owners of cars under six years old with a list price over £40,000 must pay an extra £425 per year, on top of the standard £195 rate, bringing the total to £620. From April 2025, hybrid cars no longer receive a discount on this supplement.
Critically, the Chancellor confirmed that income tax and National Insurance thresholds will remain frozen until 2031. This freeze acts as a stealth tax rise, pulling more people into higher tax bands as their nominal wages increase over time.
Taken together, these six changes signal a tightening fiscal landscape for UK residents, with the Treasury seeking to increase revenue from consumption, investments, and certain assets while offering limited relief in specific sectors.
