Rachel Reeves’ first labour budget for nearly 15 years was met by both cheers and boos that were not only heard in Parliament but were echoed through the country.
It appears that Labours budget is a bit like Marmite; you either love it or you hate it.
There were several big changes which Ms Reeves confirmed this afternoon both in minimum wage increases and increases in employers national insurance contributions, both of which will help her raise £40 billion of additional tax so her colleagues in Westminster can spend within their departments. Notably Louise Haigh will be given more money to improve transport and other infrastructure projects, as will Wes Streeting who has committed to improving the NHS by moving from analogue to digital so they can bring down waiting times. Not sure if he plans to bring down waiting times when trying to get in touch with your GP, or for hospital procedures but both would be a welcome improvement.
National living wage will increase from £11.44 to £12.21 an hour which is an increase of 6.7%. This will impact all businesses both large and small as they will have to cover an increase in staff costs of at least 6.7%.
The Employers NIC has increased from 13.8% to 15% and Labour have reduced the level at which employers start to pay NIC from £9,100 to £5,000. On the up side the employment allowance will increase from £5,000 to £10,500. This increase in the employment allowance means that small employers with 4 full time staff on living wage will no pay employers NIC. This doesn’t help small employers with qualified staff paid more than the living wage. The OBR this afternoon have stated that “it will be workers who end up paying the price” as employers keep wages as low as possible to keep down the employers NIC payments.
Capital Gains Tax has increased from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers, while they have maintained the capital gains tax on residential property at 18% and 24%.
Business Asset Disposal Relief (Entrepreneurs Relief) will remain at 10% until April 2025. It will increase to 14% between April 25 and April 26 and then it will increase to 18% from April 26. This will affect the pension plans of business owners who were looking to retire in the next three years.
Tax thresholds had been frozen by the Conservatives up to 2027/28 but from April 2028 they will now rise by the rate of inflation.
Inheritance tax thresholds will be frozen for another two years at £325,000. Inherited pensions will be brought into inheritance tax from April 2027 but Rachel Reeves has confirmed that if you give away your home to your children, your threshold will increase to £500,000.
Two permanently lower business rates for retail, hospitality and leisure properties will be introduced from 2026-2027.
Stamp duty land tax will increase from 3% to 5% for purchases of second properties.
Corporation tax is capped at 25%.
VAT on private school fees will be introduced from January 2025 and their business rates relief will be removed from April 2025.
After much discussion on social media about the fuel duty the 5% cut is kept for another year.
Draught duty will be reduced by 1.7% to cut a penny off a pint in pubs, but alcohol duty rates on non-draught products will increase in line with RPI from February next year.
Tobacco Duty escalator will be renewed for the remainder of this parliament at RPI+2% and duty on hand-rolling tobacco will increase by a further 10% this year.
There will also be a flat rate duty on all vaping liquid from October 2026.
Non-dom tax regime will be abolished, and a new residence based scheme will be introduced for those coming to the UK on a temporary basis.