To start I would remove the wallpaper, and paint the walls a light gray, replace the vanity and sink with a white one, lose the window valance as it looks rather heavy.

Wallpaper down and a nice white color on the walls. Match toilet seat to toilet color, which seems to match vanity top. Expoy paint the yellowed and damaged floor grout lines to match the wall grout lines, or paint all the grout lines (isn't as expensive as you'd think). Add a lively shower curtain, use a frosted glass applique on the window so you can open that blind. Simplify the mirror to an oval and change to whiter bulbs.

The towel rack placement is unfortunate, but unremediable without tile work, as the towels get "showered" with every flush...maybe only use for a towel when showering?

Are you a fan of red? Bathrooms would look much bigger if painted with white or other neutral colors which can be used for years to come as well as be flexible to future bathroom renovation.

One thing I'm concern was the lighting in the room, the place seems not relaxing as the red tones and chosen lights does not provide the right brightness your bathroom should emit to make it appear bigger.

Been thinking and wondering if a gray wall with a blue vanity? we Want to really freshen up this room! It’s overwhelming every time you step in here

I'd just remove the wallpaper and paint the walls a very light gray or the same white on the walls and ceiling. Remove the valance. Live with that for a while and save your pennies.

I thought it is not wall paper, but sponge painting(?). Love the blue cabinet idea, but might want to save your pennies for a major upgrade in the future. Paint will be your best friend and cheap too.

"The towel rack placement is unfortunate, but unremediable without tile work, as the towels get 'showered' with every flush..."

One can always close the lid before flushing.