TLDR:
- Labour unveils £40 billion tax increase package, largest peacetime tax rise in recent UK history
- Employers’ National Insurance to rise 1.2% to 15% from April 2025
- NHS receives £22.6 billion increase for day-to-day operations plus £3.1 billion capital boost
- Growth forecasts modest: 1.1% (2024), 2% (2025), declining to 1.5-1.6% range
- Business sector bears over half of new tax burden while public services see major investment
Rachel Reeves made history today as Britain’s first female Chancellor, presenting a budget that will raise £40 billion through tax increases to fund major investments in public services. The plan represents the largest peacetime tax rise in recent UK history.
The cornerstone of the budget is a 1.2 percentage point increase in employers’ National Insurance contributions, which will rise to 15% starting April 2025. This measure, combined with changes to the secondary threshold for contributions, will generate £25 billion annually by the end of the forecast period.
Healthcare emerges as a primary beneficiary of the new spending plan. The NHS will receive a £22.6 billion increase in its day-to-day budget, plus an additional £3.1 billion capital budget boost. This includes £1 billion for repairs and upgrades, and £1.5 billion for new hospital beds and testing capacity.
Education receives substantial funding, with the Department for Education allocated £6.7 billion in capital investment. This represents a 19% real-terms increase and includes £1.4 billion to rebuild over 500 schools in greatest need, £2.3 billion for teacher recruitment, and £2.1 billion for school maintenance.
The housing sector will see a £5 billion investment package for 2025-26, focusing on affordable housing supply. The government plans to reduce right-to-buy discounts and allow local governments to keep earnings from council housing sales for reinvestment.
Capital gains tax rates will increase, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%. The inheritance tax threshold freeze extends to 2030, with inherited pension pots becoming taxable from 2027.
Local government support includes £1.3 billion in additional grant funding, with £600 million earmarked for social care. Greater Manchester and the West Midlands gain integrated settlements, allowing greater spending control.
The minimum wage will rise by 6.7% to £12.21, representing a £1,400 annual increase for full-time workers. Plans include phasing in a single-adult rate to equalize pay for under-21s.
Transportation receives mixed attention with a commitment to the Transpennine Route Upgrade and confirmation of HS2 tunneling to London Euston. A £500 million increase in the roads budget targets pothole repairs.
The budget introduces new fiscal rules targeting debt reduction. The government pledges £1 billion for aerospace, £2 billion for automotive electric vehicles, and £500 million for life sciences. Research and development spending will reach £20.4 billion by 2025-26.
Economic forecasts show modest growth, with GDP projected at 1.1% in 2024, rising to 2% in 2025, before settling at 1.5-1.6% through 2030. Inflation is expected to average 2.5% in 2024, reaching 2.6% in 2025, before gradually declining to 2% by 2029.
The government projects a deficit of £26.2 billion in 2026, turning to surpluses of £10.9 billion, £9.3 billion, and £9.9 billion in subsequent years. Public sector net debt is forecast to decrease from £127 billion in 2024-25 to £70.6 billion by 2029-30.
Business measures include permanent lower business rates for retail, hospitality, and leisure sectors from 2026-27, with 40% relief until then, capped at £110,000. The employment allowance doubles to £10,500, offsetting national insurance increases for smaller businesses.
Energy initiatives feature a £3.4 billion warm homes plan for building upgrades and the establishment of Great British Energy, based in Aberdeen. The oil profits levy increases to 38% and receives an extension.
Compensation schemes allocate £11.8 billion for infected blood scandal victims and £1.8 billion for Post Office Horizon IT scandal victims. The budget also targets tax avoidance, aiming to raise £6.5 billion through measures targeting umbrella companies.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support