UK Unveils Budget with Targeted Tax Reforms Aiming to Raise £40 Billion 

| Image Credits: Chancellor Rachel Reeves speaks at the Labour Business Conference in London, UK

Today, October 30, 2024, UK´s Chancellor Rachel Reeves has introduced significant tax changes in Labour’s first budget since 2010, aiming to raise £40bn for the NHS and other public services.

Below are some of the main tax related changes, not an exhaustive list. More details will be published separately.

PERSONAL TAXES

• Income Tax and VAT: Rates for income tax, National Insurance for employees, and VAT remain unchanged, except for below.

• VAT on Private School Fees: Starting January 1, 2025, the government will apply the standard 20% VAT rate to all educational and vocational services provided by private schools in the UK, including boarding fees.

• Income Tax Bands: Tax thresholds will rise with inflation starting in 2028 to avoid pushing more earners into higher bands as wages grow.

• Capital Gains Tax: The basic rate on share profits will increase from 10% to 18%, while the higher rate moves from 20% to 24%. Tax rates on profits from selling additional properties stay the same.

• Inheritance Tax: Threshold freeze extended to 2030, with unspent pension pots subject to tax starting in 2027. Inheritance tax exemptions for farmland will be reduced from 2026.

BUSINESS TAXES

• National Insurance: The rate rises to 15% on salaries over £5,000, up from 13.8% on salaries above £9,100, generating an estimated £25bn annually.

• Employment Allowance: For smaller companies, the allowance to offset NI rises from £5,000 to £10,500.

• Private Equity Tax: The tax on profits from private equity deals will increase from up to 28% to a maximum of 32%.

• Corporation Tax: The main rate for businesses with profits above £250,000 remains at 25% until the next election.

ALCOHOL, TOBACCO, AND VAPING

• Vaping Tax: A new flat tax of £2.20 per 10ml on vaping liquid takes effect in October 2026.

• Tobacco and Alcohol Duties: Tobacco tax will rise by 2% above inflation, and by 10% for hand-rolling tobacco. Non-draught alcoholic drinks will see taxes increase in line with the Retail Price Index (RPI) inflation, while duty on draught drinks is reduced by 1.7%.

TRANSPORT AND ENVIRONMENT

• Fuel Duty: The 5p cut on petrol and diesel, initially ending in April 2025, will be extended for another year.

• Air Passenger Duty: In 2026, duty will rise by £2 for short-haul economy flights and by £12 for long-haul flights, with a 50% increase for private jets.

• Vehicle Excise Duty: Owners of all but the most efficient new petrol cars will face a doubled duty in the first year, promoting a shift to electric vehicles.

HOUSING AND PROPERTY TAXES

• Stamp Duty: The surcharge on second home purchases will increase from 3% to 5%. The threshold for primary home stamp duty will decrease from £250,000 to £125,000, reversing a previous cut, with first-time buyer thresholds dropping from £425,000 to £300,000.

SOURCES/ RECOMMENDED READ: 

• Autumn Budget 2024 - GOV.UK

• Budget 2024 summary: Key points from Rachel Reeves’s speech