Rumours are swirling once again over the changes that are set to come in this year’s Budget as we edge closer to November 26.
Rachel Reeves will outline key decisions on taxes and changes to public service spending, such as for the NHS, schools and the police.
The statement will be made to MPs, likely starting at about 12:30pm after Prime Minister’s Questions, and lasts for roughly an hour.
The Leader of the Opposition, Kemi Badenoch, will then give a response straight after.
What is Reeves’ goal with the Budget?
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The government needs more money to put Reeves on course to meet the ‘rules’ that she described as ‘non-negotiable’ after becoming Chancellor. The two main targets are:
- No borrowing to fund day-to-day public spending by the end of this parliament.
- To decrease government debt as a share of national income by the end of this parliament.
The Institute for Fiscal Studies, a think tank, has suggested this means Reeves will need a ‘tightening’ of £22 billion to restore the headroom she gave herself at this year’s Spring Forecast.
But the Treasury has indicated the Chancellor feels that headroom was too small, and she wants to give herself more this time round.
Are taxes going to go up in the autumn Budget?
The think tank said Reeves will ‘almost certainly’ have to raise taxes, to make this amount.
On top of this, the Chancellor recently said at a gathering of business leaders in Saudi Arabia that she wanted to make sure the UK had ‘sufficient headroom’ to prepare for any future finance shocks.
This suggests the £9.9 billion buffer she passed in last year’s Budget was not enough, making it even more likely that we will see tax increases.
Property Tax
Stamp duty and other property taxes are predicted to see some of the most significant change, as the Labour government has repeatedly ruled out raising income tax, national insurance or VAT (more on that later).
It has been rumoured that the government may replace stamp duty, the tax that buyers pay on properties above a threshold value in England and Northern Ireland, with a property tax.
Capital gains tax (CGT) is a charge applied to the increase in the value of an asset when you sell it. Main homes are currently exempt, but it applies to sales like stocks and shares, artwork and second comes.
The Times say that government is considering introducing CGT for the pricier homes, even though before last year’s election, Keir Starmer ‘absolutely’ guaranteed capital gains taxes would not be put on primary home sales.
The BBC reported that landlords may be required to pay National Insurance (NI), if being a landlord is their main job, they rent out more than one property, or they are buying new properties to rent out.
A focus on landlord taxes may be particularly awkward for the Chancellor, after she admitted last night failing to apply for a licence for renting out her family home in London.
Income Tax, National Insurance and VAT
The big question ahead of the big day is whether Reeves will break a key manifesto pledge – that Labour will not increase income tax, NI or VAT.
Those three taxes are the biggest potential moneymakers for the Treasury, and the sheer scale of the fiscal challenge facing the Chancellor means she may decide she needs to break the commitment.
Earlier this month, Reeves raised speculation by saying the Labour government would work to keep taxes on working people ‘as low as possible’.
And in an interview on Good Morning Britain, Susanna Reid asked Reeves to simply reply ‘yes or no’ on whether the Budget would involve increasing VAT, but Reeves repeatedly dodged the question.
Speculation went into overdrive at PMQs yesterday, when Keir Starmer did not immediately rule out raising these taxes as he has done in the past, when he was asked about them by Kemi Badenoch.
Some Westminster chatter suggests Reeves could increase income tax by 2p while cutting National Insurance by the same amount, allowing her to argue that technically taxes haven’t been raised on working people – but the public may not see it that way.
Pension Tax
Rumours have surfaced over the government further restricting the 25% tax-free cash that can be taken from pension pots once people reach the age of 55.
That measure was expected from last year’s Budget, but never happened.
Inheritance Tax
There were some complicated long-term Inheritance Tax changes set out in last year’s budget, which could be expanded.
They included the plan to impose Inheritance Tax on agricultural assets from April 2026.
The unused value of person’s pension funds will be also added to the cost of their estate for the rate of Inheritance Tax from April 2027.
Wealth Tax
There are many calls for Labour to increase taxes on the UK’s most wealthy. There is no party-wide agreement on the idea, but this could take the form of an annual charge on people with assets exceeding a certain threshold.
Will there be changes to government spending in the autumn Budget?
Benefits
In the same interview where Reid grilled Reeves on VAT, the chancellor announced she may strip young people of benefits if they refuse a job.
Cost of Living
However, Reeves did tell the BBC earlier this month that she would ‘take targeted action to deal with cost-of-living challenges’, particularly as inflation remains high.
Reports since have suggested the government could decrease gas and electricity bills by cutting the current 5% rate of VAT charged on energy, or by reducing regulatory costs enforced by suppliers.
Public Services
It’s unknown how much Reeves will allocate for spending on public services, however Labour previously outlined investment for the NHS rising to a £226 billion budget by 2028-29.
The spending review allocated an additional £4 billion of funding for adult social care.
Defence
In the spending review, Reeves also outlined an extra £2.2 billion for defence. This significant spend will likely be clarified in the Budget.
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