RACHEL Reeves today vowed to “turn the page on the last 14 years” of Tory rule as she revealed a staggering £40 billion of tax hikes as well as boosts for workers in her long-awaited Budget.
The Chancellor unveiled a series of measures affecting Scotland and the rest of the UK, including a massive £25 billion hike in National Insurance levied on businesses.
She also confirmed sweeteners including a boost in the minimum wage – and a freeze in fuel duty, in a major victory for the Sun’s Keep It Down campaign.
Ms Reeves said she had been forced into the tax-raising moves due to a £22 billion “black hole in the public finances” left by the Tories when they were ditched at July’s General Election.
And she said the Conservatives had left “public services on their knees”, but her Budget would “restore” public finances and “rebuild” Britain.
As she started her speech, Ms Reeves Said she was “deeply proud” to be the UK’s first female Chancellor of the Exchequer, and said she hoped it sent a message to girls that there should be “no ceiling on your ambition, your hopes, and your dreams”.
She went on to blast a “£22 billion black hole that we inherited” from the Tories.
And she said the Budget “raises taxes” by £40 billion – even higher than the £35 billion rumoured before today’s announcement.
The increase in the tax burden is said to be the biggest in modern times, outstripping the £38.5 billion raised in 1993 by Norman Lamont under John Major‘s Tory government.
She said: “The scale and seriousness of the situation that we have inherited cannot be underestimated.
“Together, the black hole in our public finances this year, which recurs every year, the compensation payments which they did not fund, and their failure to assess the scale of the challenges facing our public services means this Budget raises taxes by £40 billion.
“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.”
Here are some of the key tax, spending and wages measures unveiled by Ms Reeves:
Minimum Wage
More than three million workers will receive a pay boost after the Chancellor confirmed the National Living Wage will increase from £11.44 to £12.21 an hour from April 2025.
The 6.7 per cent increase is worth £1,400 a year for an eligible full-time worker.
The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour – the largest increase in the rate on record.
This £1.40 increase will mean full-time younger workers eligible for the rate will see their pay boosted by £2,500 next year.
Fuel Duty
There will be no increase in fuel duty – held down for 14 years – despite pressure from Treasury officials to increase it.
The move will cost the Treasury more than £3 billion, and Ms Reeves said the freeze was a “substantial commitment”.
But she said raising taxes on fuel would be “the wrong choice for working people”.
Fuel duty had been frozen at 57.95p per litre since March 2011. VAT is charged at 20 per cent on top of the total price of fuel.
The Chancellor said: “I have concluded that in these difficult circumstances – while the cost of living remains high and with a backdrop of global uncertainty – increasing fuel duty next year would be the wrong choice for working people.
“It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too.
“There will be no higher taxes at the petrol pumps next year.”
Inheritance Tax
Inheritance tax thresholds – already frozen until 2028 – will be frozen for a further two years, until 2030, the Chancellor said.
It means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants – and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.
But inherited pensions will be brought into the scope of inheritance tax from 2027.
And on inheritance taxes applied to farms, the Chancellor said the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will only apply with 50 per cent relief.
National Insurance
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you're self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You’ll usually pay National Insurance Contributions (NICs) when you’re over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 – so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you’re not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don’t need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self-assessment tax return.
Employers’ National Insurance contributions will rise by 1.2 per cent to 15 per cent from April next year.
The threshold at which firms start paying National Insurance on a workers’ earnings will also be lowered from £9,100 to £5,000 – described by the Chancellor as a “difficult choice”.
However, the Employment Allowance is being increased from £5,000 to £10,500, which the Chancellor said will mean that around 865,000 employers won’t pay any National Insurance at all next year, with over one million will pay the same or less as they did previously.
The Chancellor said her decision on National Insurance will raise £25 billion.
Compensation Schemes
The UK Government will set aside £11.8 billion to compensate those affected by the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal, the Chancellor said.
Carer’s Allowance
The weekly earnings limit for carers allowance – currently up to £81.90 per week to those with additional caring responsibilities – will rise to the equivalent of16 hours a week at the national living wage, the Chancellor said.
But by the end of this year, the benefit is due to be replaced across Scotland by the Scottish Government’s Carer Support Payment.
It will be up to SNP ministers whether they follow suit.
Income Tax
There will be no extension of the freeze on income tax and National Insurance thresholds beyond 2027/28.
National Insurance thresholds apply in Scotland, as does the tax-free personal allowance of £12,570, even though much of income tax is devolved.
The Chancellor said that keeping the thresholds at the same level – meaning more people are sucked into higher tax bands– would “hurt working people”.
Ms Reeves said the current threshold freeze was down to the previous Tory government and said: “Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips.
“I am keeping every single promise on tax that I made in our manifesto. So there will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government.
“From 2028-29, personal tax thresholds will be uprated in line with inflation once again.”
Capital Gains Tax
The headline rates of capital gains tax will increase, with the lower rate rising from 10 per cent to 18 per cent, with the higher rate increasing from 20 per cent to 24 per cent.
Ms Reeves said the decision would mean the UK “will still have the lowest Capital Gains Tax rate of any European G7 country.”
Around 350,000 people currently pay CGT – which is less than one per cent of the population.
It is paid on the sale of assets like second homes, shares, and personal property– though not cars.
Air Travel
Air passengers will be hit by an increase in flight taxes, with Air Passenger Duty on the up – adding up to £2 to the cost of an economy ticket for a short-haul flight.
Private jet users will be hit by a 50 per cent hike in APD, she added.
The Chancellor said: “Air passenger duty has not kept up with inflation in recent years so we are introducing an adjustment, meaning an increase of no more than £2 for an economy class short-haul flight.
“But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50 per cent. That is equivalent to £450 per passenger for a private jet to, say, California.”
Tobacco
The Chancellor said she would renew the tobacco duty escalator for the remainder of the Parliament at RPI plus two per cent, increase duty by a further 10 per cent on hand-rolling tobacco this year and introduce a flat-rate duty on all vaping liquids from October 2026.
Private Schools
VAT will apply to private school fees from January 2025. Ms Reeves said 94 per cent of kids in the UK attend state schools, and that the move would provide them with the “highest quality of support and teaching that they deserve”.
The Chancellor said: “We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5billion by the final year of the forecast. I can confirm today that they will in fact raise over £9billion to support our public services and restore our public finances.”
North Sea
The so-called Windfall Tax on oil and gas profits will be hiked from 35 per cent to 38 per cent. It will also be extended for a year, until March 2030.
The changes to the Energy Profits Levy will take effect on November 1 and are like to be blasted by North Sea industry, which has warned of job losses if it is squeezed further.
The increase means the headline tax rate for oil and gas activities will hit 78 per cent – one of the highest in the world.
In a further blow to the industry, a 29 per cent “investment allowance” break on the Windfall Tax – where firms can cut tax by investing– will be scrapped.
The Energy Profits Levy was first brought in at a rate of 25 per cent by the Tory government in 2022 following rocketing energy prices caused by Russia‘s invasion of Ukraine.
Non-Doms
The non-dom tax regime will be abolished in April, the Chancellor said.
The phrase refers to a UK resident whose permanent home, or domicile, for tax purposes is outside the UK – allowing them to slash their tax bills.
Last year, there were 61,000 non-doms in the UK and 13,000 living elsewhere, according to HMRC statistics.
The Chancellor said she will introduce a new, residence-based scheme with “internationally competitive arrangements” for those coming to the UK on a temporary basis.
The Office for Budget Responsibility said the measures will raise £12.7 billion over the next five years.
Alcohol
Draught duty on alcoholic drinks will fall by 1.7 per cent, meaning “a penny off a pint in the pub”, the Chancellor said.
But, Ms Reeves said that alcohol duty on non-draught products will increase in line with the RPI measure of inflation from February next year.
The Scotch Whisky Association is furious, saying it had called on the new Chancellor to “reverse the damage done by the 10.1 per cent increase in August 2023” but instead, “the damage … has been compounded”.