Key measures in UK budget

Rachel Reeves announced a series of tax rises and changes to the government’s fiscal rules

• Pramod Thomas
• 30 October, 2024

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By: Pramod Thomas

CHANCELLOR Rachel Reeves presented her first budget statement to parliament on Wednesday (30), announcing a series of tax rises and changes to the government’s fiscal rules to allow for more borrowing to boost investment.

Below are the main points from her speech:

New fiscal rules

Reeves relaxed the government’s self-imposed fiscal rules in an effort to keep in check the current budget deficit, which measures the difference between revenues and day-to-day spending.

She said her “stability” rule will bring the government’s budget into balance by the 2029/30 financial year. From there, it will commit to run a balanced current budget in the third year at every budget.

The changes will give Reeves £15.7 billion of fiscal headroom by 2029-30.

Tax on business

From April 2025, businesses’ social security contributions will increase by 1.2 percentage points to 15 per cent – a change that could potentially hurt wages and hiring.

Reeves also reduced the threshold at which businesses start paying national insurance social contributions on each workers’ salary from £9,100 ($11,797.24) per year to £5,000.

The combined changes will raise £25bn per year by the end of the forecast period, Reeves said.

Tax on the rich

Reeves said a freeze on the inheritance tax threshold would be extended until 2030. She also announced plans to bring inherited pensions into inheritance tax from 2027, and that relief for companies and farms would be limited to £1 million.

She also closed exemptions that let wealthy, often foreign residents, avoid tax on overseas income, helping to raise £12.7bn ($16.5bn) over the next five years.

Reeves said capital gains tax will rise on most assets, jumping to 18 per cent from 10 per cent at the lower rate, and to 24 per cent from 20 per cent for higher earners – changes which will raise £2.5bn.

Growth

The Office for Budget Responsibility said it expected the economy to grow by two per cent in 2025, slightly up from the 1.9 per cent it had forecast in March.

It forecast 1.8 per cent growth in 2026, 1.5 per cent in 2027 and 2028, compared with previous forecasts of two per cent, 1.8 per cent, and 1.7 per cent respectively.

Personal tax changes

Reeves ruled out prolonging a freeze on the amount of money people can earn tax-free beyond 2028-2029. From financial year 2028-29, personal tax thresholds will be uprated in line with inflation, she said.

Government spending

Spending on the state-run health services will increase by £22.6bn, and the capital budget will increase by £3.1bn over this year and 2025, Reeves said.

Reeves pledged £100bn in capital spending over the next five years after tweaking the government’s fiscal rules.

Reeves also pledged £2.9bn funding for 2025 for Britain’s armed forces and extended Britain’s pledge to provide Ukraine with £3bn a year.

Fuel tax freeze

Reeves said that a temporary five-pence cut in fuel duty would remain in place, citing global uncertainty and a high cost of living. Duty paid on motor fuels has been frozen since 2011, except for a temporary cut in the 2022/23 tax year.

Stamp duty and housing

From Thursday (31) the stamp duty tax paid on second house purchases will increase by 2 percentage points to 5 per cent, Reeves said. She did not extend a discount for home-buyers that is set to expire next March.

(Reuters)