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Peninsula Team, Peninsula Team
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Peninsula Team, Peninsula Team
(Last updated )
As some commentators have suggested, today has seen one of the biggest and most significant Budgets ever, this being the first delivered by a Labour Government since 2010 and the first ever by a female Chancellor.
It is also the most leaked Budget, as many of the items, including the decision to raise the National Living Wage and to increase the bus fare cap, were announced in advance of Rachel Reeves’ statement to Parliament.
What follows is a summary of the last Budget before autumn 2025, as the Chancellor has announced that there will be no tax changes in next year’s Spring Statement.
Business rates
The current 75% discount to business rates will be replaced when it expires in April 2025 by a discount of 40% — up to a maximum discount of £110,000. There will be 40% relief on business rates for retail, hospitality and leisure.
Carer’s allowance
The limit will be increased so that £10,000 a year can be earned while still claiming the allowance.
Compensation
£11.8 billion will be made available to compensate victims of the infected blood scandal, with £1.8 billion for victims of the Post Office scandal.
Construction
There will be an increase in the Affordable Homes Programme to £3.1 billion, with £3 billion worth of support and guarantees to increase the supply of homes and support small housebuilders. There will also be £1 billion to accelerate the removal of dangerous cladding on homes following the Grenfell Tower report.
Local authorities will be allowed to keep all the receipts from the sale of council homes and there will be over £5 billion for affordable housing.
Covid Corruption Commissioner
This post will be established shortly to examine companies who fraudulently took money during the pandemic.
Defence
An extra £2.9 billion will go to the MoD, with extra money made available for Ukraine.
Education
VAT on private school fees will be introduced from January 2025 and the Government will introduce legislation to remove its business rates relief from April next year.
Investment into breakfast clubs will be tripled and there will be a £2.3 billion increase to the core schools budget to ensure hiring of teachers for key subjects.
There will be a £1 billion increase in special educational needs (SEN) funding — an increase of 6% year-on-year.
A 19% real-terms increase in funding for the Department for Education (DfE) will mean an additional £6.7 billion, which includes £1.4 billion to rebuild 500 schools “in the greatest need” with £2.1 billion more to improve school maintenance.
Energy
The windfall tax on oil and gas profits will be increased to 38%, and will now expire in March 2030. Funding will be available next year to set up GB Energy at its new home in Aberdeen. Funding will be provided to 11 new green hydrogen projects across England, Scotland and Wales (including Bridgend, East Renfrewshire and Barrow-in-Furness).
There will also be £3.4 billion for the warm homes plan.
Growth
The Office for Budget Responsibility (OBR) has said that growth will be 1.1% in 2024, 2% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029.
Inflation
Inflation is forecast to be 2.5% this year and 2.6% in 2025.
Investment
Nearly £1 billion will be made available for the aerospace sector, over £2 billion for the automotive sector and up to £520 million for a new Life Sciences Innovative Manufacturing Fund.
National Insurance
Employers’ contribution will be increased by 1.2% to 15% from April next year, with the threshold at which it gets paid reduced from £9100 per year to £5000. However, the employment allowance will increase from £5000 to £10,500, which will mean 865,000 employers will pay no National Insurance at all next year.
NHS
There will be a £22.6 billion increase in the day-to-day health budget and a £31 billion increase in the capital budget ahead of a 10-year plan to be set out in spring 2025.
The Government will provide a further £1.5 billion for new beds in hospitals across the country, new capacity for over a million additional diagnostic tests and new surgical hubs and diagnostic centres.
Pension
The State Pension will increase by up to £470 in 2025–26 in line with the Triple Lock.
Regional development
Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year. In addition, there will be an extra £1.3 billion for councils, including at least £600 million for social care and £230 million to tackle homelessness and rough sleeping.
Tax
The Budget will raise taxes by £40 billion. HMRC will be strengthened and fraudulent umbrella companies will be targeted.
There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions by the previous government which means that, from 2028–29, personal tax thresholds will once again be uprated in line with inflation.
The lower rate of capital gains tax (CGT) rises from 10% to 18% while the higher rate will be increased from 20% to 24%. CGT rates on carried interest will go up to 32% from April 2025.
There will be a small increase in air passenger duty of £2 but for private jets the increase will be 50%.
Inherited pensions will be brought into inheritance tax from April 2027 and agricultural property relief and business property relief reformed from April 2026. The Government will apply a 50% relief in all circumstances on inheritance tax for shares on the alternative investment market (AIM), and other similar markets, setting the effective rate of tax at 20%.
The non-dom tax scheme will be abolished and replaced with a simpler, residence-based scheme.
The Government will renew the tobacco duty escalator at RPI +2%, increase duty by 10% on hand-rolled tobacco this year and introduce a flat-rate duty on all vaping liquid from 2026 with a one-off increase in tobacco duty.
Alcohol duty rates on non-draught products will increase in line with the RPI from February next year but not on draught products, “knocking a penny off the pints at the pub”.
The stamp duty land surcharge for second homes will rise by 2% to 5% with effect from 31 October 2024.
Transport
Fuel duty will not be increased and the freeze will continue next year.
The £2 bus fare cap will rise to £3 for 2025, as already announced.
There will be a £500 million increase for road maintenance, particularly to target potholes.
HS2 is to be extended to Euston. The delivery of the TransPennine upgrade to connect York, Leeds, Huddersfield and Manchester is confirmed and East West Rail will, the Chancellor said, drive growth between Oxford, Milton Keynes and Cambridge.
The Government will maintain existing incentives for electric vehicles (EVs) in company car tax from 2028.
Wages
The National Living Wage (21 and over) will increase by 6.7% to £12.21 an hour from 1 April 2025 with 18% rises in the 16–17-year-old and apprentice rates, both going up to £7.55 an hour. For those aged 21 and over, this will be worth £1400 a year for an eligible full-time worker; full-time younger workers eligible for the rate will see their pay boosted by £2500 next year. 18–20-year-olds meanwhile will see their pay increase to £10 an hour.
The Chancellor's statement to Parliament is only a summary of the Government’s plans. More detail on all the areas she covered is published in an accompanying Treasury document.
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