As Chancellor Rachel Reeves delivers her first budget, the Labour government’s much-anticipated plans are being revealed. The government has promised to keep its promise of not increasing National Insurance, VAT, and Income Tax for the working people. However, some tax rates are raised as a part of Labour’s “tough decisions”.
Here are some important announcements made:
1. National Insurance
Even though the Labour government kept their promise not to raise National insurance on employees, the employers' National Insurance contributions have been hiked from 13.8% to 15%.
At the same time, the threshold at which businesses start paying National Insurance on the employees’ earnings has been lowered from £9,100 to £5,000.
This is expected to raise £25 billion in public finances.
2. Capital Gains Tax
As anticipated, the lower rate of Capital Gains Tax has been raised from 10% to 18%, while the higher rate has gone from 20% to 24%. Meanwhile, the rates on residential property will remain at 18% and 24%.
Also, the CGT rate on carried interest is set to 32%, which will come into effect in April 2025. The government will also deliver further reforms on this subject in April 2026.
3. Employment Allowance
The government has also increased the employment allowance. This allowance has increased from £5,000 to £10,500.
As per the Chancellor, this is to help smaller businesses.
4. Strengthen HMRC
Chancellor Rachel Reeves has also promised to modernise HMRC and enhance its capability to go after those who do not pay their due taxes.
For this, she has promised to improve HMRC’s technology, recruit more experts, and increase interest on unpaid taxes, among other measures.
Reeves said while delivering the budget that this will raise £6.5 billion by the end of the Office for Budget Responsibility’s forecast period.
5. Non-dom Status
The government has decided to abolish the non-dom status from April 2025. To encourage investment, the previous non-dom status will be replaced by a modern residence-based scheme.
Stay tuned as we are providing live updates of Labour’s policies in this Autumn Budget.
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