Chancellor Rachel Reeves today finally delivers her highly-anticipated tax-and-spend Autumn Budget.
She has tasked herself with closing a claimed ‘£22billion black hole’ in the UK’s public finances, fixing public services and reviving economic growth.
Labour’s first Budget in 14 years is expected to deliver the greatest volume of tax hikes in 30 years to fund extra spending on public services, and Reeves has already indicated a shake-up of the Government’s fiscal rules to allow more borrowing to pay for investment.
The existing six-year freeze on personal tax thresholds is anticipated to be extended, forcing more into a higher income tax brackets, while the Government has also trailed significant looming change to inheritance tax and capital gains tax.
Pensions could be in the firing line with a reduction to the tax-free allowance, while Reeves could opt to include pension assets as liable for IHT and force employers to start paying national insurance on pension contributions.
An ongoing row over VAT paid by private schools is set to come to a head, while the Chancellor may also pull the trigger on a private equity sector tax raid. Employers’ national insurance contributions could go up by up to £20billion.
The Budget at a glance:
Reeves opens with promises to ‘fix the foundations’ of the British economy and revitalise growth.
‘The only way to deliver growth is to invest, invest, invest – there are no shortcuts,’ she says.
- Reeves outlines compensation package earmarked for the infected blood and Post Office scandals
- Taxes will rise by £40billion overall
- Reeves promises a crack down on fraud – saving £4.3billion annual by 2029
- Government plans to bring down benefits, set to publish a white paper on getting ‘economically inactive’ Britons back to work. Reeves promises £240million for 16 projects
- National living wage increased by 6.7 per cent to £12.21 per hour. National minimum wage for under 21s to rise to £10 and hour with plans to gradually bring in line with older workforce
- Increase in carer’s allowance confirmed, bringing it to the equivalent of 16 hours at the National Living Wage per week. A carer will now earn over £10,000 a year whilst receiving the allowance.
- Fuel duty frozen. ‘No higher taxes at the petrol pumps next year,’ says Reeves
- No increase in VAT, national insurance or income taxes for workers
- Increase in employers’ national insurance contributions by 1.2 percentage points to 15 per cent by 2025
- And threshold at which employers start paying NI on an employee’s salary will fall from £9,100 per year to £5,000
- But employment allowance for small business increased from £5,000 to £10,500
- Capital gains tax: Increase in lower rate from 10 to 18 per cent and higher rate of 20 per cent to 24 per cent. Still the lowest of any European G7 economy
- Inheritance tax thresholds freeze extended to 2030
- Inherited pensions brought into IHT from 2027
- IHT to apply with 50 per cent relief on agricultural land worth more than £1million
- Air passenger duty increased by further 50 per cent for private jets
- Hospitality set for 40 per cent relief on business rates
- 1.7 per cent cut in draught alcohol duty – ‘a penny off a pint in the pub,’ according to Reeves
- Vape tax: Flat rate of duty on all vaping liquid from October 2026, alongside increase in tobacco duty
- Abolition of non-dom tax regime, replace with ‘residents based scheme’
- Reeves maintains existing incentives for EVs in company car tax from 2028
- Private equity: Carried interest threshold raised to 32 per cent
- VAT on private school fees from January 2025 confirmed – changes to business rates relief on their way
- No extension to freeze in income tax and national insurance thresholds – they will be uprated in line with inflation
- Stamp duty land surcharge for second-homes will increase to 5 per cent from tomorrow
- Oil and gas profits windfall tax increased to 38 per cent
- Current 75 per cent discount to business rates will be replaced by a discount of 40 per cent up to a maximum discount of £110k
Public spending
- Public spending to rise by 1.5 per cent in real terms – no return to austerity, says Reeves
- Schools budget increased by £2.3bn next year. Triple investment in breakfast clubs, hiring ‘thousands’ more teachers, extra spending on mainstream and special needs education.
- Nato commitments: Reeves says Government will sped 2.5 per cent of GDP on Defence – increase £2.9billion next year
- Fresh funding for devolved governments of Scotland, Wales and Northern Ireland, as well as English regions
- Funding of National Wealth Fund to invest in growth.
OBR Projections:
OBR projections expect GDP growth of 2, 1.8 and 1.5 per cent over 2025, 2026 and 2027, respectively
On inflation, the OBR says CPI will average 2.5 per cent this year, 2.6 per cent in 2025, then 2.3 per cent in 2026, 2.1 per cent in 2027, 2.1 per cent in 2028 and 2 per cent in 2029.
Public sector net borrowing to fall from 4.5 per cent of GDP to 2.1 per cent by 2029
Chancellor Rachel Reeves posed with her Treasury team outside No11 ahead of what is set to be one of the biggest raids in history in the Commons at 12.30pm
Ms Reeves and her ministers smiled as they headed for the Commons this morning
Ms Reeves carried out the traditional photo op outside the famous No11 black door today