Perplexity Budget Prediction: Budget Bombshell UK Dances with Tax Pain

Perplexity is the wildcard in this project and our final model to test. It absorbs a huge volume of information, reacts quickly to shifts in tone and often picks up subtle changes before they show up elsewhere. It behaves less like a traditional model and more like a rapid research engine. This post shows how Perplexity read the Budget challenge through speed, breadth and pattern spotting.

What surprised me most about Perplexity’s analysis was the range of signals it processed in such a short time. It scanned everything from Treasury briefings to historic commentary and recent political shifts. This breadth meant it highlighted issues that the other models barely touched. It behaved more like a fast moving analyst tracking a live story than a model predicting a fiscal event.

Perplexity also took the boldest risk of the four. It predicted changes that were not heavily signalled at the time, based on subtle language shifts and emerging patterns. It relied on breadth rather than structure, trusting that small signals often point to larger moves. Whether those predictions land or not, the reasoning shows exactly why Perplexity is useful when uncertainty is high and information changes quickly.

Below is the summary Perplexity produced after completing the full research brief.

Budget Bombshell: Reeves Plays Stealthy Steps in Big Fiscal Tango, Breaking Promises as UK Dances with Tax Pain

Top 10 Predicted Changes with Prominence Rankings

Income tax threshold freeze extended into 2029-30 — High (Front page of the speech). The Chancellor will keep more people in higher tax bands by not increasing thresholds, a measure set to raise around £8 billion each year and drag millions more into higher rates.

Abolition of the two-child benefit cap — High (Front page of the speech). Reeves is set to end the cap, reversing a deeply controversial policy and marking a clear break from previously tough fiscal discipline. This decision will cost nearly £3 billion annually.

Capital gains tax rate rises — High (Front page of the speech). There are likely to be significant increases, targeting landlords, investors and business asset disposals. Potentially a 5–10 percentage point hike or alignment with income tax rates.

Inheritance tax tightening — Medium to High (Could sneak into the small print, but likely prominent). This involves further changes to gifting, freezing thresholds, and removing some reliefs, affecting wealth transfers and high-value estates.

Pension tax relief restrictions — Medium to High (Could sneak into the small print, but likely prominent). Cuts to tax-free lump sums and tighter allowances will primarily hit higher earners and those nearing retirement.

National Insurance could be applied to rental income — Medium (Could sneak into the small print). Targeting landlords and potentially larger property investors, this move increases tax on rental profits, potentially driving up rents.

Council tax and property tax reform — Medium to High (Could sneak into the small print, but likely prominent). Introduction of new bands for expensive homes or a potential mansion tax. The government may also look at changing how stamp duty works on high-value property.

VAT removed from energy bills or temporary energy bill support — Medium (Could sneak into the small print). This measure would provide modest help on bills, perhaps funded by cuts to longer-term energy efficiency programmes.

Business rates reform and permanent lower rate for hospitality/retail — Medium (Could sneak into the small print). A lifetime lower rate for certain sectors and more radical reforms are expected to help embattled high street businesses.

Energy windfall tax changes — Low to Medium (Buried in the red box). Industry lobbyists argue for ending the Energy Profits Levy, but the Chancellor will likely maintain or tweak it to sustain revenues and maintain the message of corporate fairness.

Professional Budget Summary

Rachel Reeves faces a bleak fiscal landscape in her first major Budget, with an estimated shortfall between £30 and £50 billion. The government cannot deliver its 2024 manifesto without breaking its main tax pledges. Stealthy tax hikes will dominate, with the freeze on income tax thresholds set to push over a million more people into higher bands, while headline rates remain unchanged.

Many will welcome the end of the two-child benefit cap, a move that directly tackles child poverty and placates Labour’s parliamentary critics, but at the price of further eroding fiscal discipline. Capital gains and inheritance tax increases will hit asset-rich households, though these measures may risk discouraging investment and entrepreneurship when the government most needs private sector confidence.

Costs will rise for the self-employed and landlords, as National Insurance could be levied on rental income and other profits, with knock-on effects for renters already struggling with high housing costs. Council tax reforms, possible mansion taxes and continued freezes on property tax thresholds will see homebuyers and middle-income households shouldering a greater burden, especially in London and the South East.

Reeves aims to soften the blow with permanent lower business rates for retail and hospitality and the possibility of VAT relief on domestic energy bills, albeit at the expense of funding for long-term energy efficiency. Despite headline measures to win back confidence, business sentiment remains bruised by earlier moves such as April’s employer National Insurance hike.

Public sector workers face a new round of job cuts and pay uncertainty, as the government seeks savings from non‑frontline services. Civil service reductions, social care pressures, and slow improvements in NHS waiting times will test patience across the public sector and fuel opposition from unions.

The Chancellor’s budget is shaped by a contradiction: she needs more tax revenue to avoid cuts to public services but must avoid raising headline rates and undermining business confidence. Public expectations for growth and prosperity have faded, replaced by a realism about the need for hard choices and long-term austerity. With the cost of living still biting and regional inequalities expected to widen, many British households are left hoping that Reeves’ fiscal choreography doesn’t end in another economic stumble.

Strictly Budget Happiness Scale Score: 5 — Off-Beat Quickstep

Rachel Reeves delivers a budget that is technically proficient but uninspired and riddled with broken manifesto promises. The abolition of the two-child cap is politically savvy and wins praise for tackling child poverty, but the government’s broader tax promises are now a relic of the campaign trail. Stealth tax measures, such as the threshold freeze, shield the government from immediate headlines but leave the public unconvinced. Economic growth remains sluggish, public service commitments are only partially delivered, and business confidence is notably fragile. It is a safe, cautious budget, unlikely to be remembered for either triumph or disaster.

Political Survival Prediction

Strictly Political Survival Scale Score: 4 — Holding Frame, Losing Timing

Rachel Reeves is expected to survive as Chancellor into 2026, but her authority will be weakened. The Budget breaks key manifesto promises on tax and does little to boost growth or ease cost of living pressures for most households. She retains backing from party leadership but faces discontent among backbenchers, businesses, and public sector unions. Popularity may slightly improve if the economy stabilises or energy prices drop, but any surprise shocks or worsening public services could threaten her role before the next election. The political year ahead is likely to be marked by careful management of discontent and little room for bold new moves.

Once you compare all four models, Perplexity becomes the outlier in the best possible way.

It spots weak signals early and reacts to shifts faster than the others. It does not give the most structured answer or the most nuanced answer, but it often gives the first hint of where things might move. For businesses watching markets, policy or competition, that kind of early signal detection has real value.

This is why the four model approach works. ChatGPT gives disciplined logic. Claude gives political context. Gemini gives long term economic reasoning. Perplexity gives speed and breadth. Put them together and you get a clearer, more confident view than any single system can produce.

Tomorrow I will publish the full Budget scoring, comparing all four models against what the Chancellor actually announces.