Everything Rachel Reeves left out of her Budget from tax to compensation

Everything Chancellor Rachel Reeves omitted from her Labour Party Budget today has been revealed - from income tax and VAT to WASPI compensation. The chancellor said the budget was a fulfilment of a promise to shield working people from tax rises, adding that they would “not see higher taxes in their payslips as a result of the choices that I am making today”.

“The only way to improve living standards, and the only way to drive economic growth is to invest, invest, invest,” Reeves said. “There are no shortcuts, and to deliver that investment, we must restore economic stability and turn the page on the last 14 years.”

Ms Reeves said she had been urged many times to reverse the final cut the Tories made to Nics for employees, but would not. “That is a promise made and a promise fulfilled," she said. “This government chooses to protect working people every single time,” Reeves said.

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Ms Reeves promised “no return to austerity” and more money for schools and education.

Income tax

Ms Reeves confirmed that the income tax rates would remain the same in her Budget. However, the threshold will rise in line with inflation in 2028. The change means a tax increase for individuals whose incomes rise with inflation, placing some into higher tax brackets.

The government has announced a shocking change that estates with lump sum pension payments will become subject to 40% tax. This could cause huge difficulty for families who rely on the payments after the death of a loved one to mitigate debts like mortgages, medical bills or funeral expenses. This is a substantial reform that unfairly penalises people who have spent years accumulating their pension pot and had planned for a particular level of income. We strongly recommend that individuals, families and their advisors re-visit their financial arrangements in light of the change.

VAT

Ms Reeves also pledged not to increase VAT, which stands at 20%. However, private schools will be subject to VAT on fees as of 2025. The change is expected to benefit the government by £1.3bn to £1.5bn per year.

She said: “To provide the highest quality of support and teaching that they deserve, we will introduce VAT on private school fees from January 2025, and we will shortly introduce legislation to remove business rates relief from April 2025, too.”

National Insurance

Rachael Reeves could have lowered the National Insurance, meaning workers would retain more of their pay. Ms Reeves has decided firms will bear the brunt of her £40bn total tax rise by increasing the National Insurance rate as well as reducing the threshold that employers start paying it at.

It means more than half of the tax rises in the Budget will be paid for by employers, with the jump in the amount they pay in National Insurance on workers' wages to generate £25bn a year.

Reeves said the rise in National Insurance hike was "difficult", but the right choice in order to fund public services.

WASPI compensation

Waspi women have warned they will consider legal action against the Government if ministers dismiss their demand for compensation over changes to the state pension age. Chancellor Rachel Reeves ignored their call for payments at the Budget, although billions of pounds were promised for victims of the infected blood and Horizon Post Office scandals.

Winter Fuel Payment u-turn

The Winter Fuel Payment will remain means-tested, meaning 10,000,000 pensioners face losing the vital benefit, after Chancellor Rachel Reeves failed to U-turn on the policy in her Autumn Budget.

The Winter Fuel Payment, distributed by the Department for Work and Pensions (DWP), helps pensioners with heating bills during the winter, providing between £100 and £300 to those who meet the criteria.

As part of her plan to fill a £40billion shortfall in the nation’s finances, Ms Reeves has reduced the qualifying criteria for the support, which was previously available to everyone over the state pension age in the UK.

Lifetime ISA

Moneyfacts said: “The chance to adjust Lifetime ISAs has sadly been overlooked, a missed opportunity to support first-time buyers. Despite rising house prices which demand higher deposits, the £4,000 LISA allowance has not been increased, nor has the upper limit on the property value threshold of £450,000.

"Those savers who therefore become ineligible through no fault of their own will have little option but to pull out their savings, incurring a penalty of 25%. It is disappointing that there are no plans to temporarily waive this charge, particularly as first-time buyers have a few months until the First Time Buyer’s Relief threshold reverts to where it was in 2022. Those considering a Lifetime ISA would be wise to check the full terms and conditions before they enter any arrangement to ensure they are eligible for the 25% Government bonus. If savers have any concerns, they may want to consider alternative savings accounts where they can move their money freely, but they will forego the Government boost that a LISA offers.”

No increase to the IHT nil rate band

It is disappointing that the government has not seized the opportunity to increase the nil-rate band, which has been frozen at £325,000 since 2009 and is completely unaligned with inflation. As property and assets prices increase, the threshold continues to stay the same and is looking to stay that way until at least 2030.