Budget 2024 17 key points you need to know as Rachel Reeves unveils £40 billion tax rises

Rachel Reeves pledged to put “more pounds in people’s pockets”, fix the NHS and grow the economy in Labour’s first Budget, despite warnings of tough decisions to come. The Chancellor, the first woman to hold the role, said there are “no short cuts” to driving the economic growth Labour has promised to deliver other than to invest.

In her speech, Ms Reeves, announcing tax rises of £40 billion, said the “prize on offer” for Labour’s plans is “immense”, laid out new funding to cut hospital waiting lists, pave the way for more affordable homes and rebuild crumbling schools. She has warned that the tax hikes and borrowing increases she is considering may not be enough to undo “14 years of damage” to the NHS, despite plans to pump billions of pounds into the health service.

A hike in the minimum wage to £12.21 an hour is among the measures included, and Labour has also promised not to increase the headline taxes on the pay cheques of “working people”: national insurance, VAT and income tax. However businesses warned they face a “perfect storm” in the budget as they are hit by more taxes, higher wage bills and the cost of implementing Labour’s overhaul of workers’ rights.

The chancellor, announced plans to increase employers’ national insurance contributions, which could raise up to £20 billion to fund investment in public services and minimum wage of at least 6.7 per cent from April for more than three million workers, will push up costs for companies. The Chancellor said: “Politics is about choices. This Labour government chooses investment over decline. In the Commons, she will tell MPs: “My belief in Britain burns brighter than ever. And the prize on offer to today is immense.

“More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all. Because that is the only way to improve living standards. And the only way to drive economic growth is to invest, invest, invest. There are no shortcuts. To deliver that investment we must restore economic stability.”

Accusing the Conservatives of failing the country, Reeves said austerity broke the NHS, said the Tory's Brexit deal harmed businesses. She also hit out at Liz Truss' mini-budget, to jeers in the chamber. "The British people have inherited their failure, a black hole in the public finances, public services on their knees, a decade of low growth and the worst parliament on record for living standards. 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 services.”

Here is a rundown of the key points in the budget

Minimum wage

More than a million low-paid workers will get a pay rise of more than triple the present rate of inflation when Reeves announces a rise to the minimum wage of more than 6.7 per cent. This will take hourly pay from £11.44 to at least £12.21, with workers under the age of 21 getting an even bigger 16 per cent, to £10 an hour. Apprentices will get the biggest pay bump, with hourly pay increasing from £6.40 to £7.55.

The increase, recommended by the Low Pay Commission, will mean an extra £1,400 a year for a full-time worker earning the main minimum wage rate, known as the national living wage, from April 2025. But it still falls short of the £12.60 per hour UK living wage calculated by the Living Wage Foundation.

Freeze income tax thresholds

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.

Compensation

Chancellor Rachel Reeves has announced £11.8 billion to compensate those impacted by the infected blood scandal, and £1.8 billion to compensate the victims of the Post Office Horizon scandal. Ms Reeves said: “The previous government also failed to budget for costs which they knew would materialise. That includes funding for vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office Horizon scandal.

“The Leader of the Opposition rightly made an unequivocal apology for the injustice of the infected blood scandal on behalf of the British state, but he did not budget for the costs of compensation. Today, for the very first time, we will provide specific funding to compensate those infected and those affected, in full with £11.8 billion in this Budget. I am also today setting aside £1.8 billion to compensate victims of the Post Office Horizon scandal, redress that is long overdue for the pain and injustice that they have suffered.”

Benefits and fraud crackdown

Chancellor Rachel Reeves said she will crack down on fraud in the UK’s welfare system, as part of reforms to ensure welfare spending is “more sustainable”. Reeves said that the government will publish a “Get Britain Working” white paper designed to get those who are unemployed back to work and reduce the strain on the benefits system. She said DWP investigators would;d have 'direct access to bank accounts' to recover funds. There will be a new crackdown on tax avoidance.

"I can today announce a crackdown on fraud in our welfare system often the work of criminal gangs. We will expand DWP’s (Department of Work and Pensions) counter-fraud teams using innovative new methods to prevent illegal activity and provide new legal powers to crackdown on fraudsters, including direct access to bank accounts to recover debt. This package saves £4.3 billion a year by the end of the forecast."

Carers allowance

On the carers' allowance, Reeves says it will increase from £81.90 per week to the equivalent of 16 hours at the National Living Wage per week. A carer can now earn over £10,000 a year whilst receiving the allowance. This will allow them to "keep more of their money", Reeves says.

Pensions

Labour will make sure that "the people who power our country receive the pension they are owed", Reeves says. That will follow a government commitment to the triple lock. Spending on the state pension is projected to rise 4.1% in 2025-26 – that is a £470 increase for over 12 million pensioners in the UK, Reeves says.

“This means that over 12 million pensioners will gain up to £470 next year.” She added: “The pension credit standard minimum guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner.”

Tax crackdown

Chancellor Rachel Reeves has vowed to crack down on unpaid taxes to raise £6.5 billion by the end of the forecast period. “Before a government considers any change to a tax rate or threshold, it must ensure that people pay what they already owe,” she told the Commons.

“So we will invest to modernise HMRC’s systems using the very best technology and recruit additional HMRC compliance and debt staff. We will clamp down on those umbrella companies who exploit workers, increase the interest rate on unpaid tax debt to ensure people pay on time, and go after promoters of tax avoidance schemes. These measures to reduce the tax gap raise £6.5bn by the end of the forecast.”

Fuel Duty

Reeves said increasing fuel duty next year would be the wrong choice for working people. It would mean fuel duty rising by 7p per litre. She says she will freeze fuel duty next year and will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year, she says.

Alcohol, Tobacco, vaping and soft drinks

Reeves announced she will be cutting duty on draft alcohol - to loud cheers from MPs. "Which means a penny off the pints at the pubs," the chancellor says. Alcohol duty rates on non-draught products will increase in line with RPI from February next year. Reeves says the government will renew the tobacco duty escalator at RPI +2%, increase duty by 10% on hand-rolled tobacco this year, introduce a flat-rate duty on all vaping liquid from 2026, and a one off increase in tobacco duty to maintain the incentive for smokers to give up smoking. Flat rate duty on all vaping liquid from 2026 Sugar tax to be increased on soft drinks and to rise with CPI

Employers’ national insurance

Reeves announced that National Insurance contributions by employers will rise from 13.8% to 15%. In addition, the threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000. Reeves says she is increasing employment allowance to help smaller businesses.

The employment allowance will increase from £5,000 to £10,500, which the chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year. She adds over one million will pay the same or less as they did previously.

Capital gains tax

Reeves tells the Commons that capital gains tax (CGT) will increase. This tax is charged on profits which are made from selling assets such as a second home or investments, including shares.

The lower rate of Capital Gains Tax will rise from from 10% to 18%, and the higher rate from 20% to 24%, she says. The CPA on residential property will remain at 18% and 24%.

Inheritance tax

Reeves said she will extend the inheritance tax threshold freeze for a further two years to 2030. That 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 £1m when a tax free allowance is passed to a surviving spouse or civil partner, she says.

The will bring inherited pensions into inheritance tax from April 2027, she says, adding she will reform Agricultural Property Relief and Business Property Relief. From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%, she says.

Covid corruption

Reeves also announced the appointment of a Covid corruption commissioner to investigate money paid out to fraudsters in the pandemic. Reeves also confirms that David Goldstone has been appointed as the chair of the new Office for Value for Money, "to help us realise the benefits from every pound of public spending".

Private schools

At present, private schools are eligible for tax breaks, which can include not paying business rates or having to charge VAT on fees. Reeves has already made it clear that she will use her budget to impose VAT and business rates on schools for the first time from January. The Institute for Fiscal Studies has predicted that the tax will raise between £1.3 and £1.5 billion a year.

Stamp duty

Reeves announced the government will increase the stamp duty land surcharge for second-homes, by 2% to 5% from tomorrow, Reeves says.

Electric vehicles

Reeves said Labour wants to support take-up of electric vehicles. The Budget will maintain existing incentives for EVs in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025, she says. The measure is forecast to raise about £400m by the end of the forecast period, she adds.

Air passenger duty

The Chancellor told the Commons: “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%. That is equivalent to £450 per passenger for a private jet to, say, California?”