Budget 2024: Key points in UK Labour's tax-and-spend plan

UK finance minister Rachel Reeves presented her first budget statement to parliament on Wednesday, unveiling the biggest tax rises since 1993 and changes to the government’s fiscal rules to increase borrowing for investment.

Below are the main points from her speech:

NEW FISCAL RULES

Reeves said she would eliminate the current budget deficit, or the difference between revenues and day-to-day spending, by the 2029/30 tax year after which the government would commit to run a balanced current budget in the third year at every budget.

She also introduced an investment rule to allow more spending on infrastructure while getting debt down as a share of the economy. The Office for Budget Responsibility said the change would create 15.7 billion pounds of fiscal headroom by 2029-30.

TAX ON BUSINESS

From April, businesses’ social security contributions will increase by 1.2 percentage points to 15% – a change that could potentially hurt wages and hiring.

Reeves also reduced the threshold at which businesses start paying social contributions on each workers’ salary from 9,100 pounds ($11,797.24) per year to 5,000 pounds.
The combined changes would raise 25 billion pounds per year by the end of the decade.

TAXES ON THE RICH

Reeves said a freeze on the threshold for paying inheritance tax would be extended until 2030. She announced plans to bring inherited pensions into inheritance tax from 2027 and relief for companies and farms would be limited to 1 million pounds.

She closed exemptions that let wealthy, often foreign residents, avoid tax on overseas income, helping to raise 12.7 billion pounds ($16.5 billion) over the next five years.

Reeves said capital gains tax will rise on most assets, jumping to 18% from 10% at the lower rate, and to 24% from 20% for higher earners to raise 2.5 billion pounds a year by 2030.

ECONOMIC GROWTH

The OBR expected the economy to grow by 2.0% in 2025, slightly up from the 1.9% it had forecast in March.

It forecast 1.8% growth in 2026 and 1.5% in both 2027 and 2028, down from previous forecasts of 2.0%, 1.8% and 1.7%.

PERSONAL TAX CHANGES

Reeves ruled out prolonging a freeze on the amount of money people can earn tax-free beyond 2028-2029. From financial year 2028-29, personal tax thresholds will be increased in line with inflation, she said.

GOVERNMENT SPENDING

Day-to-day spending on the state-run health service will increase by 22.6 billion pounds and its capital budget will increase by 3.1 billion pound over this financial year and 2025/26, Reeves said.

Reeves pledged a total of 100 billion pounds in capital spending over the next five years after changing the government’s fiscal rules.

She allocated 6.7 billion pounds for education investment in 2025 of which 1.4 billion pounds will be spent on rebuilding over 500 schools across the country.

Reeves pledged 2.9 billion pounds funding for the 2025/26 financial year for Britain’s armed forces and extended a pledge to provide Ukraine with 3 billion pounds a year.

The HS2 high-speed railway line connecting the capital to Birmingham in central England, will run to central London, Reeves said as she committed to funding for tunnelling work.

OIL AND GAS FIRMS

Reeves said a windfall tax on North Sea oil and gas producers would increase to 38% from 35% from Nov. 1, and she extended the levy until March 2030.

She also scrapped the levy’s 29% investment allowance which lets businesses offset tax from capital that is re-invested.

FUEL TAX FREEZE

A temporary five-pence cut in fuel duty will remain in place for another year because of global uncertainty and the high cost of living, Reeves said.

STAMP DUTY AND HOUSING

From Thursday, the stamp duty tax paid on second homes will increase by 2 percentage points to 5%. Reeves did not extend a discount for home-buyers that is set to expire next March.

($1 = 0.7714 pounds)