Budget 2024 predictions on plans for tax and spending - and what it all means for you
by Owen Younger · ChronicleLiveChancellor Rachel Reeves will be delivering Labour's first Budget in almost 15 years on Wednesday.
She has promised the country there will be "no return to austerity"- but there are worries from those at the top over spending plans. Some Cabinet ministers have raised grievances with Keir Starmer directly, as they attempt to boost the spending in their department.
Ms Reeves has stressed there would be "difficult choices" on spending, welfare, and tax, pointing out the £22billion black hole Labour claims to have inherited from the defeated Tory government. The Mirror have looked at what could be in the Budget on October 30.
National Insurance, VAT and income tax
During the election, Sir Keir Starmer made a vow not to increase taxes on "working people", with the party's manifesto saying: "We will not increase National Insurance, the basic, higher or additional rates of Income Tax, or VAT".
But the Chancellor is considering extending the freeze on income tax thresholds, which could push more people into paying higher rates. Thresholds normally rise in line with inflation, but Rishi Sunak imposed a freeze in 2021 to claw back cash after the pandemic, meaning that more people are dragged into paying income tax, and higher earners can end up moving to another tax band.
People can earn up to £12,570 tax-free, before paying 20% tax on everything between £12,570 and £50,270. Income above that is taxed at the higher rate of 40% up to £125,140, after which there is a 45% additional rate.
National insurance
The Government could hike national insurance for employers in the Budget. The Labour manifesto promised not to raise taxes on "working people", but it's unclear whether that extends to employers national insurance contributions (NICs).
National insurance is paid by employees and employers on earned income only, with the main rate that employees pay being 8%. Employers pay a rate of 13.8% for workers earning more than £9,100, and raising the rate by just 1p would raise around £8.5billion for the Treasury.
The Government are also thought to be looking at changing the rules so that employers have to pay NICs on the money they put into their worker's pensions schemes. If this was brought in at the current 13.8%, it could raise £17billion, but it brings with it fears that employers will cut their staff pension contributions if this happens.
Stamp duty
Stamp duty is a tax paid when you buy houses, flats and other land and buildings over a certain price in the UK. Currently, house-buyers don't pay the tax if the property they are buying is worth less that £250,000, after which they pay a rate of 5% on the worth of the property up to £925,000, before it raises again.
Ms Reeves is expected to confirm that the thresholds will fall in March 2025, which will mean that a house-buyer will only be exempt from paying stamp duty if the property they're buying is worth less than £125,000, with a return to the old thresholds is expected to raise £1.8billion a year by 2029-30. Labour is also understood to be keeping to its manifesto pledge, which was to increase stamp duty for non-UK residents, from 2% to 3%.
Fuel duty
The Budget is expected to announce the end of the temporary 5p cut in fuel duty next year, introduced as a result of the Ukraine war. The RAC admits that drivers have not felt the benefit of the cut, as sellers have instead been focused on maximising their own profits.
The Chancellor is also said to be looking at ending the freeze on fuel duty, although transport campaigners have issued a strong warning that this could cause inflation to rise.
Vape tax
In a bid to tackle soaring rates of children picking up the habit, the Chancellor is considering hiking the tax on vaping products. She is looking at imposing the same rate of tax across all nicotine strengths, after anti-smoking campaigners warned that the tiered tax system may put off smokers who need high strength nicotine products to help them quit.
It is likely that any hike to vape taxes could be matched with an increase in tobacco tax, to ensure people are still encouraged to switch to vaping if they are trying to stop smoking.
Aid Budget
Spending on overseas aid is expected to be cut in the Budget, with fears that over £2billion could be lost from the pot of money. Foreign Secretary David Lammy is among Cabinet ministers reported to be urging her not to make these cuts.
Over 120 charities warned that the UK's international aid spending could fall to the lowest level in 17 years. They wrote to the PM, warning him against the trend of diverting the foreign aid budget to support refugees and asylum seekers in the UK.
Infrastructure spending
Ms Reeves is looking to invest billions in major infrastructure projects, such as schools, hospitals and railways. Speaking in Washington DC, the Chancellor said without the change the UK would be forced to continue on the "path of decline".
She said: "I don't want that path for Britain when there are so many opportunities in industries from life sciences to carbon capture, storage and clean energy to AI and technology, as well as the need to repair our crumbling schools and hospitals."
The major change in rules, which could free up around £50billion, cannot be used for day-to-day government spending such as public sector pay. She added: "The reason we are doing that is because there are massive opportunities to invest in Britain and to get the growth and jobs of the future. But it's not possible under the current rules."
Inheritance Tax
Inheritance tax, which is charged at a 40% rate, only applies to wealthy people who have an estate worth £325,000. This rises to £500,000 if a home is given to a child or a grandchild, and according to Government figures, just 3.7% of all deaths in 2020-21 resulted in an inheritance tax charge.
Ms Reeves is said to be looking at increasing the 40% rate of inheritance tax, as well as considering limiting some of the relief or exemptions on certain inherited assets.
Capital Gains Tax
The Budget could hike taxes on people who get their money from property and shares, with talk that capital gains tax could rise in next week’s Budget. Capital gains is a tax you pay when you sell an asset which has increased in value, applying to things such as second homes or shares not held in ISAs, but not to your main home as long as you've always lived there.
It starts at a rate of 10%, on profits above £3,000, or 18% on residential property. For people who earn more money, the rate is currently 24% on gains from residential property or 20% on gains from other assets.
Speculation has been growing that capital gains tax could be brought more in line with income tax, which could mean upping the higher rate from 20% to 45%.
NHS funding
Treasury insiders are warning the NHS faces a £9billion black hole, and without extra funding, millions of appointments, scans and operations will be cancelled. They also claim it would lead to 21,000 senior doctors and 81,000 nurses losing their jobs while waiting lists would soar past record levels without emergency cash.
It is all but certain the Chancellor will announce a multi-billion pound funding package for the crisis-hit health service after promising to "fix the NHS" at a recent Cabinet meeting. The Mirror has previously reported that the NHS will be at the heart of Ms Reeves's first Budget as the government hopes to slash record waiting lists.
Two-child benefit limit and welfare spending
The Chancellor is not expected to scrap the controversial two-child benefit limit. The policy, which prevents people from claiming Child Tax Credits or Universal Credit for more than two children, has been blamed for trapping kids in poverty.
Despite repeated pleas from both Labour MPs and dozens of charities, the government has claimed it cannot afford to scrap the policy. Instead, ministers are expected to review it as part of a child poverty strategy being published in spring 2025.
The Chancellor is also said to be set on honouring the previous Tory government's plans to make around £3 billion of cuts to welfare by reforming work capability rules in the Budget. Welfare eligibility would have been tightened, saving an estimated £3billion.
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