Budget 2024: What could Chancellor Rachel Reeves announce? | Politics News

Labour’s first budget in 14 years will be delivered on 30 October, and as per the warnings of Rachel Reeves and Sir Keir Starmer, it will not be one the public is likely to welcome.

The chancellor and prime minister have spent months preparing the stage for a “painful” budget, where tax rises are likely in order to help fill the £22bn financial black hole Ms Reeves said she uncovered on entering No 11 Downing Street.

While Labour promised not to increase taxes on working people during the election campaign, the chancellor did leave some wriggle room that is now a point of speculation ahead of the budget.

Here Sky News takes a look at what measures could be included in the budget and what they could mean.

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Employer national insurance contributions

National insurance contributions are the UK’s second-largest tax and are expected to raise just under £170bn in 2024-25, about a sixth of all tax revenue, according to the Institute for Fiscal Studies (IFS).

They are paid by employees and the self-employed on their earnings, and by employers on the earnings of their staff – and at a higher rate than staff members themselves pay.

While Labour repeatedly promised not to increase taxes on “working people” during the election campaign – that is, VAT, national insurance and income tax – what it did not rule out was the possibility of increasing employer national insurance contributions.

Employers currently pay 13.8% on their staff earnings, but the tax does not apply to employee pension schemes – this is something the chancellor could now target in the budget, with the IFS saying it could raise £17bn a year.

The Tories have accused Labour of breaking their manifesto promise not to increase national insurance – although Labour believes it made clear the distinction between employees and employers.

Laura Trott, the shadow chief secretary to the Treasury, said: “In 2021, the chancellor said increasing employer national insurance was a tax on ‘workers’.

“That’s why even in her own words it breaks Labour’s manifesto promise not to increase tax on working people.”

Pension changes

Another measure the chancellor is reportedly considering is reducing the amount people can take out of their pensions tax-free.

At present, the tax-free lump sum most people over the age of 55 can take from their pension pot is 25%, up to a maximum of £268,275.

But according to The Telegraph, government officials have asked a major UK pension provider to look into the impact of cutting that amount to £100,000.

Financial advisers are said to be receiving a growing number of calls from clients wanting to cash in their 25% tax-free lump sum ahead of the budget.

Meanwhile, other changes Ms Reeves could make to pensions in a bid to raise revenue is charging national insurance on private pension incomes; introducing income tax on all inherited pensions and making pension pots liable to inheritance tax in the same way as other assets.

Inheritance tax

At present, inheritance tax – dubbed “the most hated tax” by the Tories – is charged at 40% and applies to estates worth more than £325,000.

There are, however, allowances that can mean it’s only paid on more valuable estates.

If a main residence is being passed to children or grandchildren a £175,000 allowance is added, meaning only amounts of £500,000 are subject to inheritance tax.

The tax rate could be increased, or the value people have to pay inheritance from could be lowered – while several exemptions – including on agricultural land and family businesses – could also be lifted.

Capital gains tax

Given the government’s pledge not to increase the three main taxes, there has been speculation that Labour could set its sights instead on capital gains tax.

Capital gains tax is the tax levied on the profit made on the sale of an asset that has risen in value – including second homes, shares, business assets and most personal possessions worth £6,000 or more, apart from cars.

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At present, people do not have to pay tax on the first £3,000 of profits, or £1,500 for trusts.

The tax-free threshold could be removed and the tax could be imposed on assets that are exempt now.

Alternatively, the tax rate could be increased. Capital gains tax is between 20-28% for those who pay higher rates of income tax, but could be increased to as much as 39%, according to The Guardian.

Asked about capital gains tax recently, the prime minister appeared to dismiss the idea it could be raised to as much as 39%, saying much of the budget speculation that had emerged so far was “wide of the mark”.

Council tax

Another solution the government could reach for is reforming the council tax system so the bands are changed.

Currently council tax is set in bands that are based on the 1991 value of homes, which has been branded “absurd” by the IFS and “incredibly poorly designed” by the Institute for Government.

Former shadow minister Jonathan Ashworth told Sky News during the election campaign that Labour would not change council tax bands – but there has nevertheless been reports the government could replace the banding system in favour of a 0.5% tax on the value of a property per year.

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This would mean that someone in a property worth £350,000, for example, would pay £1,750 a year.

There was also speculation that the government could scrap the 25% council tax discount for single-occupant households, but this has subsequently been ruled out.

Stamp duty

Stamp duty is paid on the cost of a property over £250,000, with more paid for second homes and by non-UK residents.

Those buying their first home are entitled to relief in order to help people get on to the housing ladder – but this is due to be cut from April next year.

Labour has confirmed the threshold for stamp duty for first-time buyers will fall back to £300,000, after it was raised to £425,000 in 2022 by Rishi Sunak.

Labour could change the tax so it is focused on annual land value tax instead of on a transaction – but that could be a hard sell with the party.

Gambling tax

A report in The Guardian recently suggested the government was considering hiking taxes on “higher harm” products such as online casino games, in a move the left-leaning Institute for Public Policy Research said could raise up to £3.4bn by 2030.

The newspaper claimed the 15% general betting duty, levied on high-street bookmakers’ profits, could be doubled, while remote gaming duty could go from 21% to 50%.

Fuel duty

In 2022 Mr Sunak cut fuel duty by 5p – until March next year.

This could be scrapped, with the RAC saying the cut costs the Treasury £2bn a year.

Fuel duty has otherwise been frozen for more than a decade.