Rachel Reeves’ Budget: Tax rises, welfare spending and ’fair and necessary choices’
Ms Reeves will announce the Autumn Budget at 12.30pm on Wednesday, straight after the Prime Minister's Questions
Rachel Reeves will deliver her Budget on Wednesday after a whirlwind of speculation about which taxes she will hike to help balance the books.
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Ms Reeves will announce the Autumn Budget at 12.30pm on Wednesday, straight after the Prime Minister's Questions.
Here we look at some of the measures the Chancellor might announce as she seeks to fill a black hole in the public finances and build up a bigger buffer so she does not have to keep coming back for more taxpayers’ cash.
Darren Jones, chief secretary to the Prime Minister, defended the measures set to be introduced in the budget to Nick Ferrari at Breakfast. This includes an increase in the National Minimum Wage from £10 to £10.85 an hour for people under 21.
Mr Jones told LBC: "I recognise it's a slight increase from £10 to £10.85 an hour for people that employ workers under the age of 21.
"But it was a manifesto commitment from the Labour Party coming into government that we were going to, over the course of this Parliament, reduce the gap between workers over 21 and under 21.
"And much like we've honoured our manifesto commitments to pensioners with the triple lock, I think it's important that we honour our manifesto commitments to young people as well.
"It's a slightly higher rate but young people have to deal with the cost of living crisis as well as."
Mr Jones added that the Labour Government has created "hundreds of thousands of jobs" since it came into power last July.
With the new jobs also comes a desire to continue improving pay for workers, he said.
He continued: "Whether it's alongside our deals to build Navy frigates or typhoons for Turkey, or our investment in nuclear and energy infrastructure, there's been lots of good investment from the government and from the private sector that's been created, creating jobs.
"But do we want more jobs and better pay? Of course we do."
Read more: Rachel Reeves’ budget to unleash ‘dirty dozen’ tax rises affecting workers, savers and pensioners
What you can expect:
Income tax: After a press conference and behind-the-scenes briefings aimed at preparing the country for a manifesto-busting increase in income tax, Ms Reeves then abandoned the idea of becoming the first Chancellor in half a century to take that step.
The measure was dropped from the “hokey cokey budget”, as Speaker Sir Lindsay Hoyle described it, after the Treasury apparently received forecasts from the budget watchdog that were not quite as grim as first feared.
Instead, she may now opt for extending the existing freeze on the income tax thresholds, which, if she also kept national insurance thresholds at their current rate, would raise around £8.3 billion a year for the Exchequer in 2029/30.
By not increasing the thresholds, she will benefit from a process called “fiscal drag”, where as wages go up, people are dragged into paying tax for the first time or shifted into a higher rate.
Increase in minimum wage: The Government has announced this week that minimum wage rates will increase next year, giving a pay rise to millions of workers.
From next April, the National Living Wage will rise by 4.1 per cent to £12.71 an hour for eligible workers aged 21 and over, which the Government said will increase gross annual earnings of a full-time worker on the rate by £900, benefiting around 2.4 million low-paid workers.
The National Minimum Wage rate for 18 to 20-year-olds will increase by 8.5 per cent to £10.85 an hour, narrowing the gap with the National Living Wage.
For 16 to 17-year-olds and those on apprenticeships, the National Minimum Wage will increase by 6% to £8 an hour.
Rail fares: They will be frozen in the Budget, saving commuters on pricier routes more than £300 a year. It is one of a series of measures aimed at easing the cost of living despite the increased tax burden many people and businesses are likely to face.
Prescriptions: The cost of an NHS prescription in England will be frozen at £9.90.
Tax for electric vehicles: The Chancellor is thought to be considering a 3p per mile tax for EVs as she seeks to protect revenues as people shift away from petrol and diesel, and the fuel duty that brings in to the Exchequer.
Freezing fuel duty: According to reports, Ms Reeves will announce she is retaining the 5p cut in fuel duty, which was introduced in 2022, and ensure it does not rise in line with inflation.
EV buyer subsidy: She will add £1.3 billion to a grant that knocks up to £3,750 off the price of an electric vehicle as part of a package that will also see £200 million go towards the rollout of charging points.
Tax hike on high-value homes: A new levy could be applied to some of the most valuable homes in what has been billed by some as a “mansion tax”.
The move would reportedly revalue some of the most valuable properties across council tax bands F, G and H and hit 100,000 of them with a new surcharge, with the threshold starting at £2 million.
Salary sacrifice: The Chancellor might introduce limits on how much employees can stash in their pensions under salary sacrifice schemes before it becomes subject to national insurance.
Reports suggest she could cap this at £2,000 a year, which would reduce how much people put away in their pension pots and put a dent in take-home pay for those who use the scheme to stay in a lower tax band.
Two-child benefit cap: As pressure has piled up, Ms Reeves is expected to scrap the limit that restricts child tax credit and universal credit to the first two children in most households.
Estimates vary on how much this would cost, with the Resolution Foundation estimating around £3.5 billion by the end of this Parliament (2029/30), while the Child Poverty Action Group and Joseph Rowntree Foundation have lower calculations of around £3 billion by then.
Crackdown on benefits fraud: Ms Reeves will seek to raise £1.2 billion by March 2031 by extending a crackdown on fraudulent and mistaken universal credit payments via the targeted case review (TCR) scheme.
Tourism tax: Visitors to English cities and regions could face paying a new tourist tax to fund local projects as the Government has announced mayors will be given the power to impose a “modest” charge on visitors staying in hotels, bed and breakfasts, guest houses and holiday lets.
While the measure has been called for by regional leaders, including London Mayor Sir Sadiq Khan and Greater Manchester’s Andy Burnham, the move has been condemned as “damaging” by the hospitality industry body UKHospitality.
Sugar tax on pre-packaged milkshakes and lattes: Health Secretary Wes Streeting announced this week that these products will be subject to the sugar tax, ending the exemption for milk-based beverages from the existing tax on sugary drinks.
The move will affect products such as packaged milkshakes, coffees and sweetened yoghurt drinks, but not drinks made on site in cafes and restaurants.
Cash Isa limit cut: According to reports, Ms Reeves may reduce the annual cash ISA limit from £20,000 to £12,000.