State pension
Under the Government’s “triple lock”, which Labour committed itself to during the election, Ms Reeves says the basic and state pension will be uprated by 4.1pc next year.
This means 12 million pensioners will gain £470 next year.
She adds this means spending on the state pension is forecast to rise by over £31bn by 2029-30 “to ensure that our pensioners are protected in their retirement”.
Fuel duty
A temporary 5p cut to fuel duty was on course to be reversed next year, with the rate also increased in line with inflation, but Ms Reeves says it will remain at current levels.
That will cost the Government £3bn she says, but adds that hiking it “while the cost of living remains high… would be the wrong choice”.
“I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year,” she says.
National Insurance
Employees have been spared a National Insurance increase but businesses are being asked to “contribute more”, Ms Reeves says.
The Chancellor said employers will see their NI contributions rise by 1.2 percentage points, to 15pc, from April.
She is also lowering the threshold at which companies start to pay on an employee’s salary, from £9,100 per year to £5,000.
The change – which economists have warned will lead to reduced hiring and smaller pay rises – will raise £25bn per year.
“I know that this is a difficult choice. I do not take this decision lightly,” Ms Reeves said.
More than 865,000 small businesses will be exempt under changes to the employment allowance, however, which is rising from £5,000 to £10,500.
Capital gains tax
From today, Ms Reeves said:
- The lower rate will rise from 10pc to 18pc
- The higher rate will rise from 20pc to 24pc
- Property rates will remain the same at 18pc (lower rate) and 24pc (higher rate)
- Lifetime limit for business asset disposal relief will remain at £1m. The rate of relief will remain at 10pc this year before rising to 14pc in 2025 and 18pc in 2026.
According to the OBR, the changes will raise £2.5bn.
Ms Reeves said capital gains on so-called carried interest in the fund management sector needed to be “fairer”.
She said the rate will rise to 32pc in April 2025 and that further reforms will be confirmed in 2026.
Inheritance tax
Ms Reeves said a freeze on inheritance tax thresholds will be extended by two years, to 2030.
This means:
- The first £325,000 of any estate can be inherited tax-free
- That rises to £500,000 if the estate includes a residence passed to direct descendants
- That also rises to £1m when a tax-free allowance is passed to a surviving spouse or civil partner
But she says inherited pensions will be brought into inheritance tax from April 2027 and that agricultural property relief and business property relief will be “reformed”.
From April 2026, the first £1m of combined business and agricultural assets will not incur inheritance tax but after that it will apply at an effective rate of 20pc.
Taken together, these measures raise over £2bn in the final year of the forecast.
“I understand the strongly held desire to pass down savings to children and grandchildren. So I am taking a balanced approach in my package today,” Ms Reeves said.
Air passenger duty
Air Passenger Duty has not kept up with inflation in recent years, Ms Reeves said, saying it would rise by “no more than £2 for an economy class short-haul flight”.
However, for private jets, the rate will increase by 50pc – the equivalent of £450 “per passenger for a private jet to California”.
Alcohol duty
Duty on non-draught products will increase in line with retail price inflation from February next year, the Chancellor confirmed.
But she says two-thirds of alcoholic drinks sold in pubs are served on draught and duty on these drinks will fall by 1.7pc.
This means “a penny off a pint in the pub”.
Tobacco duty
The Government will increase tobacco duty by retail price inflation, plus 2pc, every year for the rest of this parliament.
For hand-rolling tobacco, the rate will also rise by 10pc this year. And a flat rate duty will be introduced on all vaping liquids from October 2026.
Along with annual increases in the soft drinks industry levy, the measures will raise nearly £1bn per year by the end of the forecast period.
Stamp duty
The stamp duty land tax surcharge for second homes, known as the “Higher Rate for Additional Dwellings”, will rise by two percentage points to 5pc from Thursday, Ms Reeves confirmed.
This will “support over 130,000 additional transactions from people buying their first home, or moving home” over the next five years, the Chancellor claims, although she does not spell out how.
