Here are the key announcements at a glance…
Chancellor Unveils £40 Billion in Tax Increases to Address Fiscal Challenges
Chancellor Rachel Reeves has announced that taxes would increase by £40 billion, a measure she framed as essential for stabilising public finances. Reeves attributed the need for these increases to what she described as a £22 billion “black hole” in public finances. She noted that unfunded compensation payments and what she characterised as insufficient planning by the previous administration for public service demands had exacerbated fiscal pressures.
Addressing MPs, Reeves stated, “Any chancellor standing here today would face this reality, and any responsible chancellor would take action.” She added that these steps are crucial for “restoring stability to our public finances and rebuilding our public services.”[1]
Employers’ National Insurance Contributions to Increase
In her Autumn Budget, Chancellor Rachel Reeves confirmed a rise in employers’ National Insurance contributions. Starting in April 2025, the rate will increase from 13.8% to 15%, and the income threshold for contributions will be lowered from £9,100 to £5,000. This change means businesses will pay a higher rate and contribute National Insurance on a larger portion of employee earnings, impacting operational costs for many firms.[2]
Fuel Duty Freeze Extended Through 2025
Chancellor Rachel Reeves announced that the freeze on fuel duty will continue into 2025, adding that the 5p cut per litre, introduced as a temporary relief, will also remain in place for another year.
“There will be no higher taxes at the petrol pumps next year,” Reeves stated, explaining that under current conditions, raising fuel duty—an increase projected at 7p per litre—would not support working people as they face elevated living costs. She acknowledged that maintaining the freeze is a significant commitment in light of ongoing fiscal pressures but emphasised it as a necessary decision during a period of global economic uncertainty.[3]
Income Tax Threshold Freeze to End in 2028
The Chancellor confirmed that the freeze on income tax thresholds, introduced in 2022, will not extend beyond 2028. This freeze, which has kept the income levels for paying basic and higher rates static, will end as planned, aligning thresholds with inflation from 2028-29. Reeves affirmed her commitment to tax promises, stating, “there will be no extension of the freeze on income tax and national insurance thresholds beyond previous decisions,” framing the move as a measure to protect working families.[4]
£2.3bn more for schools and £1bn for SEND
In a major policy announcement, Chancellor Rachel Reeves has unveiled a £2.3 billion increase to the core schools’ budget for 2025. This significant funding boost will be used to hire thousands of new teachers in key subjects, as part of the government’s commitment to education. Additionally, £300 million will be allocated to further education, and £1 billion will be provided for special education, marking a 6% real-terms increase. To improve early childhood education, the government will triple its investment in breakfast clubs, making them available to thousands of schools.[5]
VAT introduced on private school fees from January 2025
The Chancellor confirmed plans to add 20% VAT to private school fees from January 1st, 2025. While the exact impact on parents’ fees will vary, it’s clear that the cost of private education is set to rise.[6]
Chancellor Announces Compensation for Infected Blood and Post Office Scandal Victims
In a historic move, Chancellor Rachel Reeves has allocated billions in compensation for victims of both the infected blood scandal and the Post Office Horizon scandal. While acknowledging former Prime Minister Rishi Sunak’s prior apology to those affected by the infected blood scandal, Reeves criticised the previous lack of adequate compensation funds.
In her statement to the House, Reeves announced that “for the very first time, we will provide specific funding to compensate those infected and those affected, in full.” The budget designates £11.8 billion for infected blood scandal victims and an additional £1.8 billion for those impacted by the Post Office Horizon scandal. Describing this funding as “long-overdue redress,” Reeves emphasised that it addresses years of suffering and injustice for those affected.[7]
Defence Budget Increased by £3 Billion
Addressing the defence budget, the Chancellor emphasised the government’s primary responsibility to ensure national security. Rachel Reeves confirmed that a Strategic Defence Review is underway, with plans to allocate 2.5% of GDP to defence in the future.
For the upcoming year, the Ministry of Defence will see a £2.9 billion budget increase, allowing the UK to exceed NATO commitments and ensure military support for Ukraine at £3 billion annually, as previously pledged.[8]
Alcohol Duty on Draught Beverages Reduced
In a move to support pubs, the Chancellor has announced a 1.7% cut to draught alcohol duty, taking a penny off the price of a pint. However, duty on non-draught alcohol will rise with inflation.[9]
April 2025 Marks End of Non-Dom Tax Status
In a significant announcement, the Chancellor confirmed plans to abolish the non-dom tax regime in April 2025, aiming to eliminate the outdated domicile concept from the tax framework. Labour will introduce a residence-based tax system, providing competitive options for temporary residents while addressing loopholes from the previous regime.
To encourage investment, the government will also extend the Temporary Repatriation Relief to three years and broaden its application, with an estimated £12.7 billion in revenue projected over the next five years.[10]
Government Borrowing to Peak at £127 Billion
The Office for Budget Responsibility (OBR) has projected that government borrowing will reach £127 billion in the current fiscal year. The Chancellor confirmed this figure in the House of Commons, adding that borrowing is anticipated to decrease from 4.5% of GDP to 2.1% by the end of the forecast period.[11]
Chancellor Announces Major Funding Boosts for Key Economic Sectors
The Chancellor outlined multi-year investment commitments to boost strategic industries. These include nearly £1 billion for aerospace research, over £2 billion for the electric vehicle industry, up to £520 million for a Life Sciences Innovative Manufacturing Fund, and £25 million for the North East Combined Authority to invest in Sunderland’s Crown Works Studio.
Additionally, the government plans to invest over £20 billion in research and development. Reeves also pledged improved broadband and mobile coverage, including in rural areas.[12]
Stamp Duty Surcharge Rises to 5%
Chancellor Rachel Reeves has announced a 3% increase in the stamp duty land tax surcharge on second homes, raising it to 5%.This measure, as outlined in the Labour Party manifesto, is intended to generate additional revenue while simultaneously supporting first-time homebuyers.[13]
Air Passenger Duty Increased
Air passengers will face increased flight taxes, with the Chancellor announcing a rise in air passenger duty (APD) that could add up to £2 to the price of an economy ticket for short-haul flights. Users of private jets will see a 50% increase in APD. Current rates for economy flights include £7 for domestic journeys, £13 for short-haul, and £88-£92 for long-haul flights. The Chancellor emphasised her commitment to a different approach regarding private jet taxes by significantly raising their duty.[14]
Minimum Wage to Increase by 6.7%
Chancellor Rachel Reeves confirmed that the national living wage will increase by 6.7%, reaching £12.21 per hour starting in April next year (2025). For younger workers aged 18 to 20, a record boost of 16.3% will raise their minimum wage to £10 per hour, aligning with recommendations from the Low Pay Commission.
Reeves emphasised the Labour government’s commitment to supporting workers, describing it as “a Labour policy to protect working people.” She also announced an increase in the weekly earnings limit for Carer’s Allowance, raising it to align with 16 hours per week at the National Living Wage rate. This change, the largest since Carer’s Allowance was established in 1976, allows carers to earn over £10,000 annually without losing their benefits.[16]
Chancellor Confirms Increase in Capital Gains Tax
Chancellor Rachel Reeves also announced increases to capital gains tax rates, raising the lower rate from 10% to 18% and the higher rate from 20% to 24%. She noted that rates on residential property gains will also be maintained at these new levels. Highlighting competitiveness, Reeves stated this keeps the UK’s capital gains tax rate as the lowest among European G7 nations. Additionally, the Business Asset Disposal Relief lifetime limit remains at £1 million, with its rate set to increase from 10% to 14% by April 2025, and 18% from 2026-27.[17]
Inheritance Tax Thresholds and Loophole Closure
In today’s budget, the Chancellor also announced changes to inheritance tax. Only 6% of estates will pay inheritance tax this year. She extended the inheritance tax threshold freeze to 2030, allowing the first £325,000 to remain tax-free and up to £500,000 with a residence passing to direct descendants. Additionally, this could be up to £1 million when a full inheritance allowance is passed to a spouse. Although these points haven’t changed. Reeves plans to close a pension inheritance loophole, removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning by bringing unspent pots into the scope of inheritance tax from April 2027. Agricultural and Business Property Relief, has been adjusted for assets over £1 million facing inheritance tax at 20%, a reduction of the 100% relief to 50%, after April 2026.[18]
