Rachel Reeves will become the first woman to deliver the UK Budget in the House of Commons this afternoon. The Chancellor will use the financial statement to set out the Labour Government’s tax and spending plans.
This is the first Labour Budget in 14 years and follows the party’s return to Government in July. Reeves is expected to announce a raft of measures as she aims to plug what she calls a £22 billion black hole left by the Tories.
Labour promised not to raise tax on “working people” during the election campaign, so it will have to use other levies to raise money.
Employers’ national insurance
Reeves is expected to raise employers’ national insurance. It had promised not to raise NI before the election, but has insisted that applied to workers and not employers. The SNP has been against this increase and has said it will cost jobs.
Fuel duty
Reports have suggested Reeves will announce the end of a temporary 5p fuel duty cut in the Budget. It has been estimated this could raise £4.2bn.
Minimum wage rise
The minimum wage will rise by over six per cent in the Budget. It will benefit 18-20-year-olds the most as they will be paid the same rate as older workers. The rate is reportedly set to go from £11.44 to over £12.12 next year.
Inheritance tax
Reeves will reportedly announce the Government will raise more money from inheritance tax, although it is not yet clear how. The levy is paid by only four per cent of families, as there is a £325,000 tax-free allowance. Spouses or civil partners are exempt from paying the tax.
Big rise in NHS funding
The NHS could receive a big increase in funding from the UK Government. Reports have suggested the rise could be about four per cent – which would be between £7bn and £8bn. The Scottish Government would receive extra funding in this case, although it would not necessarily have to go to the NHS.
Capital Gains
Capital Gains Tax is one of the levies which looks set to go up. This is a tax on the profit you make when you sell an asset. Reports have said the levy on the sale of shares will rise but this will not apply to second homes.
Income tax thresholds
Income Tax thresholds look like they will be frozen in the Budget. Reeves is expected to extend the current six-year freeze on the thresholds, which would mean that people pay more tax as their incomes increase. Although income tax is devolved, this measure could raise £7bn a year for the UK coffers. Freezing the tax-free allowance would apply in Scotland.
VAT on private school fees
One of Labour’s election pledges was to remove the exemption which meant that private school fees are not liable for VAT. This will change at the start of next year.
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