Labour Budget 2024 predictions and what UK Government plans mean for you
Chancellor Rachel Reeves will soon deliver Labour's first Budget in almost 15 years in what she promised will be "no return to austerity".
Ms Reeves stressed there would be "difficult choices" on spending, welfare, and tax to her cabinet colleagues and the previous government's £22billion black hole will need to be filled.
Many of the government's plans have been leaked and our sister title, The Mirror, has looked at what could be in the Budget on October 30.
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National Insurance, VAT and income tax
During the election, Keir Starmer pledged not to raise taxes on "working people". The party's manifesto stated: "We will not increase National Insurance, the basic, higher or additional rates of Income Tax, or VAT." The Prime Minister has now reaffirmed that the government would "keep our manifesto pledges," therefore anticipate these rates to remain unchanged.
However, the Chancellor is considering extending the freeze on income tax thresholds, which was initially implemented by the Tories, and might force more individuals into paying higher rates.
People can earn up to £12,570 tax-free before paying 20 percent tax on the amount between £12,570 and £50,270. Income beyond that amount is taxed at a higher rate of 40 percent up to £125,140, after which there is a 45 percent extra rate.
National Insurance
Mr Starmer has sent a clear hint that the Government may increase national insurance for employers in the Budget. He argued that the Labour manifesto vowed not to raise taxes on "working people," but skirted questions on whether it included employers' national insurance payments (NICs).
Ms Reeves has also warned that businesses would face an increase in NICs. She stated that Labour's campaign vow not to raise national insurance on "working people" referred to employees rather than employers.
NICs are not levied on other kinds of income such as savings, pensions, or property, but Ms Reeves is thought to be considering changing the regulations so that companies must pay NICs on the money they contribute to their employees' pension plans. If this was brought in at the current 13.8 percent rate, it might generate £17 billion. But the speculation has sparked fears employers will cut their staff pension contributions if NICs are introduced on them.
Stamp duty
Currently, homebuyers do not pay stamp duty if the property they are purchasing is worth less than £250,000. After that, they pay a five percent rate on the property's value up to £925,000 before it rises again. First-time buyers pay no stamp duty on houses valued up to £425,000.
Ms Reeves is anticipated to affirm that the thresholds will fall in March 2025 (which is already scheduled to occur). It means that a homebuyer will only be free from paying stamp duty if the home they're purchasing is worth less than £125,000, or £300,000 for a first-time buyer. A restoration to the former limits is estimated to generate £1.8 billion per year by 2029-30.
Labour is also said to be sticking to its election vow to raise stamp duty for non-UK residents from 2% to 3%.
Fuel duty
Ms Reeves is expected to announce the end of the temporary 5p cut in fuel duty next year, which was introduced following the war in Ukraine. The RAC, who would usually be against a rise in fuel duty, has admitted that drivers have not felt the benefit of the cut as sellers have not passed on lower prices to them, instead focusing on boosting their own profits.
The Chancellor is also said to be looking at ending the 13-year freeze on fuel duty though transport campaigners have issued a strong warning that this could cause inflation to rise. In the summer Mr Starmer refused to rule out any changes to fuel duty.
Vape tax
Ms Reeves is contemplating raising the tax on vaping items in an effort to combat the rising proportion of children taking up the habit. Chancellor Reeves is considering applying the same tax rate on all nicotine strengths. This comes as anti-smoking advocates cautioned that the tiered tax scheme might deter smokers who require high strength nicotine products to help them stop. Any increase in vape taxes is likely to be accompanied by an increase in tobacco taxes, ensuring that those who are attempting to quit smoking are still encouraged to convert to vaping.
Aid Budget
Spending on overseas aid is expected to be cut in the Budget. There are fears Ms Reeves could cut over £2billion from the pot of money. It has been reported that Foreign Secretary David Lammy is among Cabinet ministers reported to be urging her not to make the cuts.
Infrastructure spending
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 said: "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 paid at 40%, only applies to rich individuals with estates worth £325,000. This increases to £500,000 if a house is left to a child or grandchild, giving a couple a combined tax-free property maximum of £1 million when they die. According to government data, just 3.7% of all deaths in 2020-21 resulted in an inheritance tax charge.
Ms Reeves is thought to be considering raising the 40% inheritance tax rate, as well as reducing some of the relief or exemptions available for some inherited assets.
Capital Gains Tax
Mr Starmer dropped a major hint that capital gains tax - which is levied on the sale of assets - could rise in next week’s Budget.
Asked if someone who works but gets income from shares and property was a working person, Mr Starmer said: “Well they wouldn’t come within my definition.” The PM’s official spokesman later clarified that Keir Starmer was referring to people who “primarily get their income from 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 warn that without emergency funding, 21,000 senior doctors and 81,000 nurses would lose their jobs, and that waiting lines would reach new highs.
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.
Two-child benefit limit and welfare spending
The Chancellor is not expected to scrap the controversial two-child benefit limit introduced by the austerity-era predecessor George Osborne. 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.
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.
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