British finance minister Rachel Reeves presented her first budget statement to parliament today, announcing a series of tax rises and changes to the government's fiscal rules to allow for more borrowing to boost investment.
Below are the main points from her speech:
NEW FISCAL RULES
Rachel Reeves relaxed the government's self-imposed fiscal rules ina n effort to keep in check the current budget deficit, which measures the difference between revenues and day-to-day spending.
She said her "stability" rule will bring the UK government's budget into balance by the 2029/30 financial year.
From there, it will commit to run a balanced current budget in the third year at every budget. The changes will give Reeves £15.7 billion of fiscal headroom by 2029-30.
TAX ON BUSINESS
From April 2025, businesses' social security contributions will increase by 1.2 percentage points to 15% - a change that could potentially hurt wages and hiring.
Reeves also reduced the threshold at which businesses start paying national insurance social contributions on each workers' salary from £9,100 pounds a year to £5,000.
The combined changes will raise £25 billion a year by the end of the forecast period, Reeves said.
TAX ON THE RICH
Reeves said a freeze on the inheritance tax threshold would be extended until 2030. She also announced plans to bring inherited pensions into inheritance tax from 2027, and that relief for companies and farms would be limited to £1m.
She also closed exemptions that let wealthy, often foreign residents, avoid tax on overseas income, helping to raise £12.7 billion over the next five years.
Reeves said capital gains tax will rise on most assets, jumping to 18% from 10% at the lower rate, and to 24% from 20% for higher earners - changes which will raise £2.5 billion.
GROWTH
The Office for Budget Responsibility said it expected the economy to grow by 2 in 2025, slightly up from the 1.9% it had forecast in March.
It forecast 1.8% growth in 2026, 1.5% in 2027 and 2028, compared with previous forecasts of 2%, 1.8%, and 1.7% respectively.
PERSONAL TAX CHANGES
Reeves ruled out prolonging a freeze on the amount of money people can earn tax-free beyond 2028-2029.
From financial year 2028-29, personal tax thresholds will be uprated in line with inflation, she said.
GOVERNMENT SPENDING
Spending on the state-run health services will increase by £22.6 billion and the capital budget will increase by £3.1 billion over this year and 2025, Reeves said.
Reeves pledged £100 billion in capital spending over the next five years after tweaking the government's fiscal rules.
She also pledged £2.9 billion funding for 2025 for Britain's armed forces and extended Britain's pledge to provide Ukraine with £3 billion a year.
FUEL TAX FREEZE
Reeves said that a temporary five-pence cut in fuel duty would remain in place, citing global uncertainty and a high cost of living.
Duty paid on motor fuels has been frozen since 2011, except for a temporary cut in the 2022/23 tax year.
STAMP DUTY AND HOUSING
From Thursday the stamp duty tax paid on second house purchases will increase by 2 percentage points to 5%, Reeves said.
She did not extend a discount for home-buyers that is set to expire next March.
