Rachel Reeves says she will raise taxes by £40bn #UKFinance

Mortgage rates will be higher after the budget, according to forecasts published by the Office for Budget Responsibility.

The below graph is from the OBR’s official economic and fiscal outlook document which was published earlier today:

As you can imagine, comments are flying in regarding the budget speech. Here are comments from the National Institute of Economic and Social Research on frozen tax thresholds.

Ben Caswell, senior economist, said:

The non-dom tax regime will be abolished from April 2025, replacing it with a residency based scheme with competitive reliefs for temporary visitors.

Paul Barham, partner at Forvis Mazars, said:

The GMB union welcomed the budget but urged the government to move more quickly on infrastructure projects.

Gary Smith, the GMB’s general secretary, said:

“Never in the history of our country will taxes be higher than they are under this Labour government,” said Sunak.

He says Labour specifically promised that they “wouldn’t raise taxes on working people” — but instead have increased national insurance for employers, thus “breaking that promise”.

“They’re taxing your job, they’re taxing your business, they’re taxing your savings. You name it, they’ll tax it.”

He also added that the OBR does not back up the government’s claim of a £22bn black hole, saying it does not appear in their report.

Former prime minister Rishi Sunak has accussed Rachel Reeves of breaking Labour’s manifesto tax promises, saying the budget contained “broken promise after broken promise”.

He said both the chancellor and prime minister Sir Keir Starmer s had not been “straight with the British people” at the general election.

He said:

Sterling has pared this morning’s losses against the dollar and fell only modestly against the euro, as the UK budget announcement keeps the British economic outlook intact.

The OBR forecast Reeves’ fiscal budget to be in balance two years earlier than forecast in March.

To achieve that, there will be £40bn in tax rises, including a 1.2% increase to employer’s NI, for which the threshold has been cut to £5,000, and through hikes to capital gains and carried interest taxes.

Kyle Chapman, FX market analyst at Ballinger Group, said:

Read more from Yahoo Finance UK

Amisha Chohan, head of small cap strategy at Quilter Cheviot:

Here’s a mini summary from Sky News’ political editor Beth Rigby.

Rachel Reeves said the Labour government is committed to HS2 terminating at Euston in central London but suggested private investment would be needed to finish that part of the project.

She said:

The NHS will received a major funding boost, said Reeves, with an extra £22.6bn to be allocated to the day-to-day health budget. Meanwhile £3.1bn will be given for capital investment.

“This is the largest real-terms growth in day to day NHS spending outside of COVID since 2010,” the chancellor said.

“There is no more important job for government than to keep our country safe, and we are conducting a Strategic Defence Review to be published next year. And as set out in our manifesto, we will set a path to spending 2.5% of GDP on defence at a future fiscal event.

“Today, I am announcing a total increase to the Ministry of Defence’s Budget of £2.9bn next year ensuring the UK comfortably exceeds our NATO commitments and providing guaranteed military support to Ukraine of £3bn per year, for as long as it takes.”

Reeves says that 94% of children in the country attend state schools and that she will introduce VAT on private school fees from January 2025.

The government will soon introduce legislation to remove their business rates relief from April 2025.

She also announced a £1bn increase in special educational needs funding, an increase of 6% year-on-year, saying she is tripling investment in school breakfast clubs.

She added:

Turning to air passenger duty Reeves says that it has not kept up with inflation. There will be a small adjustment, worth no more than £2 for economy, short-haul flights.

However, she is increasing the rate of air passenger duty on private jets by a further 50% — equivalent to £450 per passenger.

Taking a dig at Rishi Sunak, she confirmed this would be the equivalent of £450 per passenger for a flight to California.

To discourage non-smokers and young people from taking up vaping, Reeves has announced a vaping duty for the first time at £2.20 per 10ml of liquid.

This will start from 1 October 2026, in addition to a one-off tobacco duty rise to keep the incentive to choose refillable vaping over smoking.

Reeves will extend the inheritance tax threshold freeze for a further two years to 2030.

The first £325,000 of any estate can be inherited tax-free has risen to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.

She said:

Reeves told Commons today that capital gains tax (CGT) will increase — the lower rate of will rise from from 10% to 18%, and the higher rate from 20% to 24%. Meanwhile, the rates on residential property will remain at 18% and 24%.

This tax is charged on profits which are made from selling assets such as a second home or investments, including shares.

She added that this will still be the lowest rate for any European G7 country.

Brian Byrnes, head of personal finance at Moneybox, said:

The chancellor said the Labour government will increase the carer’s allowance from £81.90 per week to the equivalent of 16 hours at the national living Wage per week.

A carer can now earn over £10,000 a year whilst receiving the allowance. This will allow them to “keep more of their money”, Reeves says.

Ian Goodwin, employment tax partner at Forvis Mazars, said: