The Budget bombshells that were floated...but never came
From income tax to inheritance tax, this years Budget has seen unheard of levels of leaks. Here LBC looks at what was predicted to be in the Budget but never materialised.
This Budget lead up has been astonishing in its leaks, kite flying, briefing, counter briefing and ultimately the U-turns.
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Businesses have been left not knowing what to plan for and retailers and the hospitality industry have been left reeling from the doom-laden predictions.
Many have reported that the measures would kill the much-needed pre-Christmas spending rush.
So some of the biggest surprises came not from what was in the Budget but what we thought - and were told - would be, but instead was absent.
(That is, until just before PMQs, when the OBR published their response to the Budget before the Budget had been revealed)
INCOME TAX
If it hadn’t been for the Financial Times - the whole world would have expected today’s Budget’s big ticket item to be a rise in income tax.
The pitch had been well and truly rolled for such a rise. Rachel Reeves had said: "It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending.” But then on November 14 - the FT revealed it was not to be.
This ruined Rachel Reeves’ rabbit out the hat moment in which she could have praised economic circumstances for the U-turn. So it was no surprise today that it was omitted but worth noting nonetheless.
INCOME TAX THRESHOLD FREEZE FOR THREE YEARS
The Chancellor promised at last year’s Budget that when the current four-year hold on income tax threshold unfreezes, she would not continue it. We had expected her today to extend for two years, but in a surprise move, she went further and has extended it for three years. This will raise £8.3billion by the end of the Parliament, and will bring 920,000 people into the higher-rate tax band and 4,000 people into the 45p additional rate by 2030.
This is being criticised as a "stealth tax" because almost two million people will be moved into different tax brackets as wages increase with inflation.
People will pay 20 per cent income tax if their earnings rise above £12,570, with the 40 per cent rate from £50,271 and the 45 per cent band from £125,140.
INHERITANCE TAX
There was a small change, but one that largely impacts farmers and small business owners.
Farmers who are married, or have deceased spouses, will now be allowed to transfer their inheritance tax allowance to one another if one of them dies having not used their allowance.
The National Farmers Union (NFU) welcomed the change, however, it says it doesn't go far enough.
NFU President Tom Bradshaw said: “It’s only right that agricultural allowances can be transferred between spouses and it’s something we’ve been calling for, but it doesn’t go anywhere near far enough in protecting the working people of the countryside. It does nothing to alleviate the burden it puts on the elderly and vulnerable."
Ms Reeves has faced pressure from farmers to axe plans to introduce inheritance tax on farming land and businesses since the measure was announced in last year's budget.
The Chancellor’s plans to introduce a 20 per cent rate on agricultural land and businesses worth more than £1 million have become a political flashpoint for a sector struggling with rising costs, tough market conditions and worsening climate impacts.
FUEL DUTY FROZEN - FOR NOW
The ‘will they - won’t they’ freeze fuel duty went on for weeks. On the eve of the Budget, the newspapers reported that fuel duty would be frozen. But in a twist that was not expected - it will only be frozen until September 2026. The OBR indicates that this cut will be reversed through a staggered approach.
Rates will then gradually return to March 2022 levels by March 2027.
The planned inflation-linked increase in fuel duty has been cancelled for the 2026/27 financial year, but is scheduled to return immediately afterwards.
Fuel duty has not risen since April 2010.
However, the Chancellor has also announced that from April 2028, drivers of battery electric cars will be hit by a 3p per mile tax, while drivers of plug-in hybrids will be charged 1.5p per mile.
She said: “Because all cars contribute to wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just the type of car they own.”
The new tax has been named electric vehicle excise duty (eVED) and is to be paid each year alongside the existing vehicle excise duty VED).
BANK LEVY? NO BANK LEVY
There had been reports about the Chancellor raising taxes on banks - effectively putting a levy on their profits. The think tank IPPR estimated that such a bank tax could raise up to £8 billion a year for public services.
But after outcry from the industry, this looked unlikely in the days leading up to the fiscal event and was then not announced at the Budget.
EXIT TAX
A proposed 'exit tax’ was clearly being considered by the Treasury. This would have imposed capital gains for wealthy individuals when they left the UK. Countries like Australia, Canada and the USA already have similar schemes. There were concerns about people fleeing before the law took effect and it harming the economy. This, again, looked unlikely in the days before the Chancellor delivered her Budget and indeed was not announced.
Ultimately, this was not a Budget full of surprises. Partly because of the leaks but also because, after Liz Truss's Budget and the market reaction - the strategy was to not catch the gilt markets by surprise. The days of true rabbits out of hats are well behind us.