Reeves increases Taxes by £40 Billion in Post-Election Budget

Reeves increases Taxes by £40 Billion in Post-Election Budget | 4 minute read

UK Chancellor, Rachel Reeve’s highly anticipated budget reveals plans to raise taxes by £40 billion overall – the highest tax raising budget in modern times, topping Normal Lamont’s tax hike in 1993.

The Finance Minister started proceedings by highlighting that the Labour Government believed they have been left with no other option than to make these controversial decisions, accusing the Conservatives of leaving a £22 billion black hole in the UK’s public finances, and leaving public services broken.

In order to address these issues, Reeves stated that she would raise taxes by £40 billion a year in order to cover the £22 billion shortfall inherited by her Labour Party.

Reeves stated in her budget report: “Any Chancellor standing here today would face this reality. And any responsible Chancellor would take action. That is why today, I am restoring stability to our public finances and rebuilding our public service.”

As part of her budget, Reeves announced a string of revenue-raising moves to help to rebuild Britain once again, including changes to the tax rules on capital gains and inheritances.

Here are some of the key announcements outlined in the Chancellor’s budget including the rise in taxes.

 

National insurance

Reeves announced plans to raise employers’ national insurance contributions by 1.2 percentage points to 15% from April. There are also plans to reduce a secondary threshold when contributions are due from £9,100 to £5,000. It is hoped that the implementation of these measures will raise £25bn a year by the end of the forecast period.

 

Housing

The Government plans to spend £5bn on housing, including increasing the supply of affordable housing, reducing right-to-buy discounts, and hiring hundreds of new planning officers to accelerate housebuilding in the UK.

 

Transport

Within the budget, Reeves also committed to the Transpennine Route Upgrade in a bid to improve capacity at Manchester Victoria, as well as electrifying the Wigan to Bolton route. A promise was also made to support the East-West rail link between Oxford and Cambridge. Finally, the budget outlined that there will also be a £500m increase in the roads budget next year to target potholes.

 

Income tax

Reeves also stated that the Government will uprate personal tax thresholds on income tax and national insurance in line with inflation from 2028-29

 

Capital gains and inheritance tax

Capital gains tax will be increased, with the lower rate changing from 10% to 18% and the higher rate will rise from 20% to 24%.  Reeves also advised that the Government will extend a freeze on the threshold for inheritance tax, allowing £325,000 to be inherited tax free.

 

NHS

£22.6bn will be ring fenced for the day-to-day health budget, to coincide with a  £3.1bn increase in the capital budget. This includes £1bn for repairs and upgrades, and £1.5bn for new beds in hospitals and testing capacity.

 

Private school fees

The Chancellor announced that VAT will be introduced to private school fees from January 2025.

 

Fuel duty

Reeves also announced that she will be extending the freeze for a year and maintains the last government’s 5p cut.

 

Tobacco and alcohol

The Government will implement a levy on vapes, which will be increased in line with tobacco. A cut in draught duty by 1.7%, which is the equivalent of a penny off a pint in the pub, will also come into play.

 

The minimum wage

Reeves announced changes to the National Living Wage, which will increase by 6.7% to £12.21 for over 21s. There will also be a single adult rate phased in over time to eventually equalise pay for under-21s.

 

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