Reeves Budget raises £40 billion in taxes

The Chancellor, Rachel Reeves, has announced tax rises of £40 billion in the first Labour Budget for 14 years, the largest tax-raising Budget in more than 30 years.

Reeves, the first woman to hold the post, delivered the Budget on 30 October.

Employers pay more

The biggest measure is a rise in the National Insurance paid by employers, from 13.8 per cent to 15 per cent from next April. The threshold at which employers start paying will also be cut, from £9,100 to £5,000 a year. Together, the changes are expected to raise around £25 billion a year.

The employment allowance, which reduces bills for small businesses, will be increased.

Other taxes

Capital gains tax will rise, with the lower rate going up from 10 to 18 per cent and the higher rate from 20 to 24 per cent. Inheritance tax will apply to pensions and to farms and businesses worth more than £1 million, at a reduced rate.

VAT will be charged on private school fees from January, and the tax on private jets will rise. Stamp duty on second homes will increase.

Labour kept its election promise not to raise income tax, National Insurance for employees or VAT.

Spending

Reeves said the money would help to fix the foundations of the economy and rebuild public services. The NHS will receive an extra £22.6 billion for day-to-day spending over two years.

She also changed the rules on borrowing to allow more investment in roads, housing and other infrastructure.

The national living wage will rise to £12.21 an hour from April.

The inheritance

Reeves blamed the previous Conservative government for leaving what she called a £22 billion black hole in the public finances. The Conservatives dispute the figure.

Reaction

Business groups have warned that the rise in employer National Insurance will hit jobs and wages. Farmers have protested against the changes to inheritance tax.

The Office for Budget Responsibility said the Budget would lead to higher growth in the short term, but that inflation and interest rates would be slightly higher than otherwise.

The Conservative leader, Rishi Sunak, said the Budget broke Labour's promises to working people.