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When is the Budget and what might be in it?
Chancellor Rachel Reeves has acknowledged she is considering tax rises and spending cuts ahead of her autumn Budget on 26 November.
Before the 2024 general election, Labour promised not to increase income tax, National Insurance or VAT for working people.
But the Institute for Fiscal Studies (IFS) says she will “almost certainly” have to raise taxes to make up a £22bn shortfall in the government’s finances.
The chancellor of the exchequer’s Budget statement outlines government plans for raising or cutting taxes. It also includes big decisions about spending on public services such as health, schools and police.
The statement is made to MPs in the House of Commons. It usually starts at about 12:30 UK time – after Prime Minister’s Questions – and lasts for about an hour.
The Leader of the Opposition, Conservative MP Kemi Badenoch, will give an immediate response. MPs will then debate the measures for four days, before voting on them.
There has been a lot of speculation that Reeves will have to raise taxes because she needs more money in order to meet her self-imposed rules for government finances.
She has two main rules, which she describes as “non-negotiable”:
- Not to borrow to fund day-to-day public spending by the end of this parliament
- To get government debt falling as a share of national income by the end of this parliament
The IFS said finding £22bn would allow the government to maintain the £10bn buffer it currently has, but argued there was a “strong case” for trying to increase it further.
The £10bn margin Reeves left herself after her Spring Statement in March was one of the lowest a chancellor has given themselves since 2010, with the average for the period standing at £30bn.
Income Tax and National Insurance (NI)
The government could extend the current freeze on income tax and NI thresholds, which is due to end in 2028.
Freezing the thresholds means that, as salaries rise over time, more people reach an income level at which they start paying tax or qualify for higher rates. This is often referred to as a “stealth tax”.
Speaking to the BBC in September, Reeves did not rule out extending the freeze.
The Resolution Foundation think tank – which has close links to some members of the government – believes some personal taxes will have to rise.
As part of a package of measures, it recommended cutting 2p from the employee NI rate, while adding the same amount to income tax.
Such a move would potentially affect pensioners, landlords and the self-employed more than workers. Their tax would increase but they wouldn’t benefit from a matched cut to NI.
Reeves has signalled that she is likely to focus on wealthy individuals, arguing “those with the broadest shoulders should pay their fair share”.
She may change the rules for limited liability partnerships (LLPs), which are sometimes used by high earning professionals such as lawyers and accountants.
Those who operate as LLPs are treated as self-employed and do not have to pay employers’ NI. The Times reported that changing this could raise £2bn.
Help with the cost of living
In October, Reeves told the BBC that she would take “targeted action to deal with cost of living challenges” while inflation remains high.
The BBC understands that the government could intervene to bring down gas and electricity bills. This could happen by reducing some regulatory levies currently added to bills, or by cutting the current 5% rate of VAT charged on energy.
The Sunday Times previously reported that it might fall to zero.
Property taxes
Reports suggest the government may reform property taxes. This could include replacing stamp duty – a tax buyers pay on properties above a certain value in England and Northern Ireland – with a property tax.
Landlords could have to pay more taxes, and council tax could be replaced.
Some people selling their main residence may have to pay capital gains tax.
Youth employment guarantee
In September, Reeves said that young people who have been out of work for 18 months will be given paid placements to help them secure full-time employment.
Isa reform
In July, the chancellor ruled out any immediate reform to cash Isas (Individual Savings Accounts). There had been speculation that she wanted to reduce the annual allowance to push people into investing in shares instead.
However, the FT has reported that she may announce a cut in the cash ISA limit from the current £20,000 to £10,000.
Pension changes
There has also been speculation about possible changes to pension rules, such as the level of tax relief available to savers and the size of the cash lump sum which can be withdrawn.
Cutting the higher rate tax relief on pension contributions would save the Treasury money, but may make pension savings less attractive.
Business taxes
The TUC, the umbrella group for trade unions in the UK, has called for higher taxes on online gaming companies and on banks’ profits.
In September, the chancellor told ITV News that “there is a case for gambling firms paying more”.
The Sunday Times reported that William Hill owner Evoke could close up to 200 of the chain’s betting shops in an attempt to stem losses, with the exact number being influenced by any changes to taxes on the sector.
Inheritance tax
In last year’s Budget, the government said that from April 2026, inherited agricultural assets worth more than £1m, which were previously exempt from inheritance tax, would be taxed at a rate of 20%.
In October, the Sunday Times reported that ministers were exploring changes to this, However, Farming Minister Dame Angela Eagle told the BBC’s Farming Today programme there was “no likelihood” of the policy being changed.
The Labour government says that boosting the economy is a key priority.
A growing economy usually means people spend more, extra jobs are created, more tax is paid and workers get better pay rises.
The UK economy has been slowing in recent months after a strong start to 2025.
The latest figures show that the economy grew by 0.1% in August, after a 0.1% contraction in July.
Over the three months to August, UK GDP grew by 0.3%, down from the 0.6% growth seen between March and May.
Meanwhile, government borrowing – the difference between public spending and tax income – reached £20.2bn in September. That was the highest level seen for the month in five years, driven by an increase in debt interest payments.
Prices are also still rising faster than expected.
Inflation held steady at 3.8% in the year to September, the same as in July and August, which was lower than expected, but still above the Bank of England’s 2% target.
In August, the Bank cut interest rates for the fifth time in a year, taking the cost of borrowing to the lowest level for more than two years.
It made the cut because of concerns that the jobs market was weakening, with data showing job vacancies were continuing to fall and wage growth was slowing.
However, the Bank held rates at its next meeting in September, arguing the UK was “not out of the woods” on inflation.
In October, the International Monetary Fund (IMF) forecast that the UK was set to be the second-fastest-growing major economy in 2025.
However, it also predicted that the UK will face the highest rate of inflation among G7 nations in both 2025 and 2026, driven by rising energy and utility bills.
The former One Direction member-turned-solo artist appears on the Sunday Times list for the first time.
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Budget 2026: FM Nirmala Sitharaman gives a strong push to manufacturing, infrastructure and job creation, while proposing a simpler tax and customs system.
Finance Minister Nirmala Sitharaman presents the Union Budget 2026-27.
Budget 2026 Takeaways: Finance Minister Nirmala Sitharaman on Sunday presented the Union Budget 2026-27, giving a strong push to manufacturing, infrastructure and job creation, proposing a simpler tax and customs regime, and hailing the government’s modernisation drive as a “reforms express”.
The Budget 2026 is anchored around three ‘kartavyas’ — driving growth by enhancing productivity and competitiveness, building people’s capacity, and ensuring inclusive development under the vision of Sabka Saath, Sabka Vikaas.
In her ninth consecutive Budget in Parliament, Sitharaman laid out a multi-pronged strategy to sustain growth amid global uncertainty, including expanding domestic electronics and semiconductor capabilities, de-risking infrastructure projects, skilling India’s youth for emerging technologies, and easing compliance for taxpayers and importers.
Here are the key takeaways from Budget 2026 across manufacturing, infrastructure, skills, AI, taxation and customs duty.
Manufacturing Gets A Boost
Budget 2026 put a special emphasis on the manufacturing landscape in India. The outlay for electronics components manufacturing was raised sharply to Rs 40,000 crore, while new schemes for rare earth magnets, chemical parks, container manufacturing and capital goods seek to reduce import dependency, and strengthen domestic supply chains. Textiles got an integrated, employment-oriented package covering fibres, clusters, skilling and sustainability.
Infrastructure-Led Growth
Infrastructure got a boost with a higher capex allocation and initiatives like a risk guarantee fund to de-risk projects for private developers, new dedicated freight corridors and national waterways, dedicated REITs (real estate investment trusts) for recycling of significant real estate assets of central public sector enterprises (CPSEs), and a seaplane VGF (viability gap funding) scheme.
The Centre’s capital expenditure (capex) target has been increased to Rs 12.2 lakh crore for FY27, up from Rs 11.2 lakh crore earmarked for the current financial year. Moreover, maintaining the fiscal discipline, Sitharaman said the government expects the fiscal deficit to be at 4.3 per cent of the GDP in 2026-27, lower than 4.4 per cent projected for the current financial year.
Tier-II and Tier-III cities were placed at the centre of urban growth via City Economic Regions, backed by reform-linked funding.
“We shall continue to focus on developing infrastructure in cities with over 5 lakh population (Tier II and Tier III), which have expanded to become growth centres,” Sitharaman said in her Budget Speech.
Greater Emphasis On Skilling
The Budget placed renewed emphasis on the services economy as a jobs engine. A high-powered Education-to-Employment and Enterprise Committee will realign skilling with market needs, including the impact of emerging technologies.
Content creation and creative industries get a boost through AVGC labs in schools and colleges, support for animation, gaming and comics, and new institutional capacity for design and hospitality. Tourism-linked skilling, from guides to digital heritage documentation, signals a clear intent to convert culture and content into employment and exports.
“I propose to support the Indian Institute of Creative Technologies, Mumbai in setting up AVGC Content Creator Labs in 15,000 secondary schools and 500 colleges,” FM Sitharaman said. AVGC stands for animation, visual effects, gaming and comics.
AI & Semiconductors Push
Artificial intelligence (AI) was positioned as a cross-sector force multiplier rather than a standalone theme. The Budget provided a push to artificial intelligence (AI) by promoting adoption with governance, agriculture, education and skilling, including proposals for AI-enabled advisory tools for farmers and AI integration in education curricula.
On hardware, the semiconductor strategy expanded decisively under ISM 2.0 (India Semiconductor Mission 2.0), with focus on domestic equipment manufacturing, materials, research centres and workforce development, signalling a long-term commitment to building a resilient chip ecosystem in India.
Taxation, ITR, TDS, TCS
A major structural reform comes with the Income Tax Act, 2025, effective April 1, 2026, containing simpler rules and redesigned forms.
Budget 2026 provided compliance relief for individuals, including extended timelines for revising returns to March 31 from December 31 earlier, staggered ITR due dates, and easier filing of Form 15G/15H through depositories.
Individuals with ITR-1 and ITR-2 returns will continue to file till July 31, and non-audit business cases or trusts are proposed to be allowed time till August 31, according to the Budget Speech 2026-27.
“I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee. I also propose to stagger the timeline for filing of tax returns. Individuals with ITR 1 and ITR 2 returns will continue to file till 31st July and non-audit business cases or trusts are proposed to be allowed time till 31st August,” Sitharaman said.
TDS (Tax deducted at source) rules were clarified for manpower services, while a rule-based system for lower or nil TDS certificates is proposed. TCS rates were cut to 2% for overseas tour packages, education and medical expenses under liberalised remittance scheme (LRS). Litigation is targeted through integrated assessment and penalty orders, lower pre-deposit requirements, and wider immunity provisions.
TDS on the sale of immovable property by a non-resident will be deducted and deposited through resident buyer’s PAN (Permanent Account Number)-based challan instead of requiring TAN (Tax Deduction and Collection Account Number), Sitharaman said.
Customs Duty Tweaks
Customs duty rationalisation continued with a clear focus on domestic manufacturing, energy transition and ease of living. Exemptions have been extended or introduced for capital goods used in lithium-ion batteries, critical minerals processing, nuclear power projects and aircraft manufacturing.
Personal imports will become cheaper with a reduction in duty on goods for personal use from 20% to 10%. Seventeen cancer drugs and additional rare-disease treatments were exempted from customs duty. Process reforms aimed at trust-based, tech-driven clearances, faster cargo movement and lower compliance costs, especially for exporters and MSMEs (micro, small, medium and enterprises).
STT On F&O Hiked
The Budget increased securities transaction tax (STT) on futures trading from 0.02% to 0.05% and on options trading from 0.10% to 0.15%, a move that upset the capital markets with the BSE Sensex crashing more than 2,300 points from the day’s high and the NSE Nifty dropping to 24,571.75.
Securities Transaction Tax (STT) is a direct tax imposed on the buying and selling of securities in India.
Commenting on the Budget, Prime Minister Narendra Modi said, “The Union Budget reflects the aspirations of 140 crore Indians. It strengthens the reform journey and charts a clear roadmap for Viksit Bharat.”
February 01, 2026, 14:43 IST
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