What the Budget means for you – from pensions to Stamp Duty and capital gains tax! B
Rachel Reeves delivered her first Budget earlier today
Rachel Reeves delivered her Budget earlier today (Image: Parliament TV)
Rachel Reeves delivered her first Budget earlier today, here is how the announcements made will affect your life.
DWP benefits set to rise by 1.7% in April 2025
A number of other Department for Work and Pensions (DWP) benefits, such as Attendance Allowance and PIP will also rise by the same figure.
Benefits are usually uprated every April based on inflation statistics from the previous September. This year, the Consumer Price Index (CPI) inflation rate increased by 1.7 percent.
State pensioners will gain up to £470
State pensioners are to receive a 4.1 percent boost to their payments from April next year, with the full new state pension increasing by more than £470 a year.
Chancellor Rachel Reeves has confirmed in her Autumn Budget today (April 30) that payments will go up in line with the triple lock, with the full new state pension going up from £221.20 a week to £230.30 a week, an increase of £473.60 a year.
National Insurance contributions rise by 1.2% for employers
Currently, employers pay 13.8 percent of a worker’s wage in National Insurance, but this will rise by 1.2 percentage points to 15 percent.
Separately, the Chancellor is bringing down the threshold at which employers will now be required to pay NI on the wages of staff from £9,100 to £5,000.
However, hundreds of thousands of small businesses will be exempted from these changes. This is because, for example, no NI will be payable at all for any firm employing fewer than four people on the minimum wage.
Estimates suggest an employer will face paying an extra £865.80 in NI per year for a member of staff paid £30,000 a year in what critics describe as a “jobs tax”.
Increasing the amount of NI that employers must pay does not affect employee wage packets in the short term, however business leaders and economists warn it could see businesses recoup the costs by capping future pay rises.
Separately, if businesses take on the full costs themselves, this will hit their profits and ability to invest and hire more people.
The government has decided not to pursue a measure to require employers to pay NI on their contributions to staff pensions, which would have led to lower retirement nest eggs.
Rachel Reeves raises Carer’s Allowance weekly limit
The Chancellor has announced a significant raise in the weekly limit of Carer’s Allowance.
The Chancellor announced that the weekly earning limit for Carer’s Allowance will be increased to the equivalent of 16 hours at the national living wage per week.
Currently, Carer’s Allowance, which is claimed by around 1.4million people in the UK – is worth £81.90 a week.
Capital Gains Tax increased
Fewer than 3 percent of Britons pay Capital Gains Tax (CGT) which is levied on the profit made on assets, such as shares, property other than the family home, gold bullion and artwork, when they are sold.
Currently, higher-rate taxpayers face CGT rates of 20 percent on most assets and 24 percent on residential property. The figures for basic-rate taxpayers were 10 percent and 18 percent.
Following the Budget, CGT has been raised from 10 percent to 18 percent for basic rate taxpayers and from 20 percent to 24 percentfor higher rate taxpayers – to match the rates on residential property.
The change means the increase in tax on a £10,000 gain will rise from £1,000 to 1,800; and the figure for a higher rate taxpayer will rise from £2,000 to £2,400.
Separately, there will be new tax rates applied to the profits made on the disposal of business and agricultural assets. The rate will hold at 10 percent this year, but changes to 14 percent in April 2025, and then to 18 percent in April 2026.
Universal Credit is set to rise by 1.7 percent (Image: Getty)
Inheritance tax freeze extended until 2030
The exemption that allows people to pass on pension pots free of tax is being scrapped.
Exemptions that allow people to pass on business property and agricultural land of IHT are being removed. From April 2026, after the first £1 million of business and agricultural assets, inheritance tax will apply at an effective rate of 20 percent.
This new tax regime will also apply to qualifying AIM shares, which previously fell outside of a person’s estate for inheritance tax.
Beer duty in pubs slashed
Rachel Reeves has announced the Government will cut draught duty by 1.7%, which means “a penny off a pint in the pub”.
The Chancellor told the Commons: “I can confirm that alcohol duty rates on non-draught products will increase in line with RPI from February next year, but nearly two-thirds of alcoholic drinks sold in pubs are served on draught.
“So today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%, which means a penny off a pint in the pub.”
Rachel Reeves maintains Tory freeze on income tax thresholds
The Chancellor has announced that the Government will be maintaining the freeze on Income tax thresholds until 2028.
This move will see people pulled into paying higher rates through a process known as “fiscal drag”
Charlene Young, pensions and savings expert at AJ Bell previously described the decision to continue the tax threshold freeze as “tantamount to raising tax by the back door”.
Stamp duty change
Chancellor Rachel Reeves has announced the government will increase the stamp duty for second homeowners and buy to let landlords.
The tax will rise from by 2 percentage points to 5 percent under a change that will come into effect from tomorrow.
The effect of the change will be to increase the stamp duty payable on a second property costing £500,000 from £10,000 to £25,000.
Separately, stamp duty concessions on house purchases are set to be cancelled in a move that add up to £15,000 to the cost and risk killing a first-time buyer boom.
The concessions meant there was no stamp duty for first-time buyers on the first £425,000 of a property’s value. And this applied to all homes worth up to £625,000.
However, this will revert back to an original regime where the stamp duty threshold for first-time buyers will come back down to £300,000 and only apply to properties worth up to £500,000.
Ben Perks, Managing Director at Orchard Financial Advisers commented: “The Chancellor may have just killed off the buy-to-let market with immediate effect.
“A 2 percent rise in Stamp Duty by tomorrow will cause shockwaves throughout the property industry. Anyone completing on a buy-to-let purchase tomorrow has to find a few thousand pounds to continue, and this just won’t be possible for many landlords. It’s a wider issue than first thought, though. Any chain with a buy-to-let purchase within it is now in a highly precarious position.”
Winter fuel payment axe for millions confirmed
The Winter Fuel Payment will remain means-tested, meaning 10,000,000 pensioners face losing the vital benefit, after Chancellor Rachel Reeves failed to U-turn on the policy in her Autumn Budget.
The Winter Fuel Payment, distributed by the Department for Work and Pensions (DWP), helps pensioners with heating bills during the winter, providing between £100 and £300 to those who meet the criteria.
Private schools
VAT will be applied to private school fees from January at the same time reliefs offered against business rates will be removed.
The Institute for Fiscal Studies has predicted that the tax will raise between £1.8 billion a year, while private school leaders predicted tens of thousands of parents will be forced to switch children to the state sector.
Sin taxes
The government is cutting alcohol duty on draught products sold in pubs from February next year, reducing the cost of a pint by 1 penny.
However, the duty rates charged on beer, wine and spirits sold through retailers will increase in line with the RPI measure of inflation, which will drive up prices from February.
Duty on tobacco will rise by the RPI measure of inflation plus 2 percent, and the figure for hand rolling tobacco will jump 10 percent.
A new “vape tax” is being introduced which will add £2.20 to a 10ml bottle of vape liquid.
Air Passenger Duty
The flights duty will increase by £2 per ticket for those flying economy to shorthaul destinations and £12 per ticket for long haul flights. Higher rates for private jets will increase by 50 percent and the government is consulting on extending the higher rate to include more private jets.
Non-doms
The Budget is closing loopholes in the tax system, including ending the unfair current treatment of non-dom residents with a new residence-based system to make sure that everyone who makes their home in the UK pays their taxes here.
It is claimed the change will raise £4.1 billion in 2026-27.
