In a historic move, Chancellor Rachel Reeves has revealed Labour’s first Budget since 2010 following the party’s return to power in July’s general election. The budget announced tax rises amounting to £40bn in order to fund the NHS and other public services. It is vital to take note of the major measures detailed below:
Personal taxes:
• No changes to rates of income tax and National Insurance (NI) for employees, as well as VAT
• Increasing income tax band thresholds to keep pace with inflation, after 2028, so as to prevent more people from being pushed into higher bands as wages rise
• Capital gains tax will increase from 10% to 18% for the basic rate on profits from selling shares, and from 20% to 24% for the higher rate
• No changes to rates on profits from selling additional property
• The inheritance tax threshold will remain frozen at the current level until 2030. Pension pots that are unspent will be subject to the tax from 2027
• Exemptions for inheriting farmland will be lesser from 2026
Business taxes:
• Companies to pay 15% NI on salaries above £5,000 as of April, higher than the previous rate of 13.8% on salaries above £9,100, in order to raise an extra £25bn per year
• Employment allowance will increase from £5,000 to £10,500, which will help smaller companies reduce their NI liability
• Private equity managers will pay more tax on their share of profits from successful deals, with the rate rising from up to 28% to up to 32% from April
• The main rate of corporation tax, which is paid by businesses on taxable profits over £250,000, will remain at 25% until the next election
Wages, benefits, and pensions:
• An increase in the legal minimum wage for over-21s from £11.44 to £12.12 per hour, which will take effect from April.
• The rate for 18-20-year-olds will rise from £8.60 to £10, as a long-term plan towards a “single adult rate.”
• Basic and new state pension payments will go up by 4.1% next year due to the “triple-lock”; more than working-age benefits.
• Further eligibility criteria for the allowance paid to full-time carers will be widened, by increasing the maximum earnings threshold from £151 to £195 a week.
Transport:
• The Conservatives’ 5p cut in fuel duty on petrol and diesel will be extended for an additional year instead of ending in April 2025.
• The £2 cap on single bus fares outside London and Greater Manchester will increase to £3 as of January.
• The commitment to funding tunnelling work to take the HS2 high-speed rail line to Euston station in central London remains.
• The government will “secure the delivery” of the Transpennine rail upgrade between York and Manchester.
Drinking and smoking:
• A new flat-rate tax of £2.20 per 10 mL of vaping liquid will be introduced from October 2026, as the government shelves Tory plans to link the levy to nicotine content.
• The tax on tobacco will increase by 2% above inflation, and the tax on hand-rolling tobacco will increase by 10% above inflation.
• The tax on non-draught alcoholic drinks will rise in line with the higher RPI measure of inflation while the tax on draught drinks will be cut by 1.7%.
• The government will review thresholds for sugar tax on soft drinks, considering extending it to “milk-based” beverages.
Government spending and public services:
• Day-to-day spending on NHS and education in England will rise by 4.7% in real terms this year, before smaller rises in the next.
• Defence spending will rise by £2.9bn next year.
• In real terms, the Home Office budget will shrink by 3.1% this year and 3.3% next year, owing to presumptuous savings from the asylum system.
• An extra £1.3bn will be allocated to local councils next year, which will keep all Right to Buy sales money from next month.
Housing:
• Social housing providers will be permitted to increase rents above inflation as part of a multi-year agreement.
• The discounts for social housing tenants buying their property under the Right to Buy scheme will be reduced.
• The stamp duty surcharge on second home purchases in England and Northern Ireland will be increased from 3% to 5%.
• The threshold at which house buyers start paying stamp duty on their main home will fall from £250,000 to
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