Budget 2024: Employers’ national insurance will raise more than predicted as chancellor seeks to increase taxes by £40bn

Published

2 months ago

October 30, 2024

admin

The budget will increase taxes by £40bn, with the lion’s share coming from a £25bn rise in employers’ national insurance contributions, the chancellor announced at the budget.

Rachel Reeves said the amount businesses will pay on their employees’ national insurance contributions will increase from 13.8% to 15% from April 2025, with the current £9,100 annual threshold lowered to £5,000, in what she called a “difficult choice” to make.

The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, said most of the burden from the increase will be passed on to workers through lower wages, and consumers through higher prices.

It estimated the national insurance hike would reduce the average hours worked by the equivalent of 50,000 hours.

Follow live: All the latest on budget day

The £40bn rise in taxes is thought to be the largest increase at a budget since John Major’s government in 1993 and is set to more than fill the £22bn “black hole” Labour said the Conservative government left them with.

Ms Reeves also announced the current freeze on income tax thresholds will end in 2028/29 and will be uprated in line with inflation after that.

The previous Conservative government froze the thresholds which meant more people paying higher rates of tax as their salary increases and they move into higher tax bands.

The OBR said the tax burden will reach “a historic high of 38% of GDP by 2029/30” and predicted inflation and interest rates will both be higher as a result of the budget.

Ms Reeves said a “line-by-line breakdown” of the black hole will be published, which she said shows there were “hundreds of unfunded pressures on the public finances” under the Conservatives.

The chancellor, who said she was “deeply proud” to be the country’s first female chancellor, insisted the Labour government would “invest, invest, invest” and put “more pounds in people’s pockets”.

Some of the other major changes the chancellor also announced include:

• Fuel duty will stay frozen next year and 5p cut to remain

• Capital gains tax lower rate will increase from 10% to 18%, higher rate from 20% to 24%

• Residential property capital gains tax will remain at 18% and 24%

• Two “permanently lower” business tax rates for retail, hospitality and leisure properties

• 40% relief on business rates in 2025-26 up to a £110,000 cap

• Inheritance tax thresholds frozen until 2030

• Higher rate stamp duty for second homes increased to 5% from Thursday

• Alcohol duty rates on non-draught drinks to increase in line with RPI from February

• Draught alcohol duty cut by 1.7% – 1p off a pint

• HS2 will go to Euston in central London

• Every government department must make 2% cuts by next year

• £22.6bn extra for the NHS’ day-to-day health budget, £3.1bn more for the capital budget

• £2.3bn for schools to hire teachers next year, £6.7bn for the schools capital budget

• £2.9bn for Armed Forces next year

• £500m increase in road budgets next year.

The chancellor started her budget speech by saying the country “voted for change” and “responsible leadership” on 4 July at the general election – and went on to attack the “irresponsibility” of the previous Conservative government.

“We must restore economic stability and turn the page on the last 14 years,” she said.

Ms Reeves added: “The party opposite failed our country. Their austerity broke our National Health Service. The British people have inherited their failure.”

“They called an election to avoid making difficult choices,” she continued.

The chancellor outlined her priorities as economic growth and the NHS, and pledged an end to “short-termism”.

Labour promised to keep the triple lock on pensions, where the state pension goes up each year by whichever is higher of 2%, inflation or earnings growth.

She said that means it will be uprated by 4.1% next year so more than 12m pensioners will be up to £470 better off.

She also set aside £11.8bn for compensation for victims of the infected blood scandal, and £1.8bn for victims of the Post Office IT scandal.

Ahead of the first Labour budget since Alistair Darling’s in 2010, Labour committed in its election manifesto to not increase income tax, national insurance or VAT on “working people”, which Ms Reeves said she had kept to.

Various ministers got into a tangle over who exactly qualified as a working person in the weeks before the budget.

A few plans were leaked or announced ahead of the budget, including:

• All private school fees will include VAT from January, business tax relief to be removed from private schools in April

• An increase on employers’ national insurance – but they did not say by how much

• A change to the fiscal rules – the way in which the government borrows and pays back money – in order to allow for greater investment spending

• An increase to the bus fare cap by 50% to £3

• A boost to the national living wage, with the minimum someone aged 21 and over can be paid increasing by 6.7% to £12.21 an hour

• The national minimum wage, for 16 to 20-year-olds, will also increase – by 16.3% to £10 an hour.

This breaking news story is being updated and more details will be published shortly.

Please refresh the page for the fullest version.

You can receive breaking news alerts on a smartphone or tablet via the Sky News app. You can also follow @SkyNews on X or subscribe to our YouTube channel to keep up with the latest news.

Politics

Wolf Capital co-founder pleads guilty to $9.4M Ponzi, promised 547% returns

Published

5 hours ago

January 11, 2025

admin

Wolf Capital co-founder pleads guilty to .4M Ponzi, promised 547% returns

According to the US Department of Justice, Wolf Capital’s co-founder has pleaded guilty to wire fraud conspiracy for luring 2,800 crypto investors into a Ponzi scheme.

Politics

Rachel Reeves lands in China amid pressure to cancel trip over market turmoil

Published

6 hours ago

January 11, 2025

admin

Rachel Reeves lands in China amid pressure to cancel trip over market turmoil

Making Britain better off will be “at the forefront of the chancellor’s mind” during her visit to China, the Treasury has said amid controversy over the trip.

Rachel Reeves flew out on Friday after ignoring calls from opposition parties to cancel the long-planned venture because of market turmoil at home.

The past week has seen a drop in the pound and an increase in government borrowing costs, which has fuelled speculation of more spending cuts or tax rises.

The Tories have accused the chancellor of having “fled to China” rather than explain how she will fix the UK’s flatlining economy, while the Liberal Democrats say she should stay in Britain and announce a “plan B” to address market volatility.

However, Ms Reeves has rejected calls to cancel the visit, writing in The Times on Friday night that choosing not to engage with China is “no choice at all”.

👉 Click here to follow Electoral Dysfunction wherever you get your podcasts 👈

The chancellor will be accompanied by Bank of England governor Andrew Bailey and other senior executives.

She will meet with her counterpart, Vice Premier He Lifeng, in Beijing on Saturday to discuss financial services, trade and investment.

She will also “raise difficult issues”, including Chinese firms supporting Russia’s invasion of Ukraine and concerns over constraints on rights and freedoms in Hong Kong, the Treasury said.

But it did not mention whether Ms Reeves would raise the treatment of the Uyghur community, which Downing Street said Foreign Secretary David Lammy would do during his visit last year.

On Friday, Culture Secretary Lisa Nandy defended the trip, telling Sky News that the climbing cost of government borrowing was a “global trend” that had affected many countries, “most notably the United States”.

“We are still on track to be the fastest growing economy, according to the OECD [Organisation for Economic Co-operation and Development] in Europe,” she told Anna Jones on Sky News Breakfast.

“China is the second-largest economy, and what China does has the biggest impact on people from Stockton to Sunderland, right across the UK, and it’s absolutely essential that we have a relationship with them.”

Read more – Ed Conway analysis: The chancellor’s gamble with China

However, former prime minister Boris Johnson said Ms Reeves had “been rumbled” and said she should “make her way to HR and collect her P45 – or stay in China”.

While in the country’s capital, Ms Reeves will also visit British bike brand Brompton’s flagship store, which relies heavily on exports to China, before heading to Shanghai for talks with representatives across British and Chinese businesses.

It is the first UK-China Economic and Financial Dialogue (EFD) since 2019, building on the Labour government’s plan for a “pragmatic” policy with the world’s second-largest economy.

Sir Keir Starmer was the first British prime minister to meet with China’s President Xi Jinping in six years at the G20 summit in Brazil last autumn.

Relations between the UK and China have become strained over the last decade as the Conservative government spoke out against human rights abuses and concerns grew over national security risks.

Navigating this has proved tricky given China is the UK’s fourth largest single trading partner, with a trade relationship worth almost £113bn and exports to China supporting over 455,000 jobs in the UK in 2020, according to the government.

During the Tories’ 14 years in office, the approach varied dramatically from the “golden era” under David Cameron to hawkish aggression under Liz Truss, while Rishi Sunak vowed to be “robust” but resisted pressure from his own party to brand China a threat.

The Treasury said a stable relationship with China would support economic growth and that “making working people across Britain secure and better off is at the forefront of the chancellor’s mind”.

Ahead of her visit, Ms Reeves said: “By finding common ground on trade and investment, while being candid about our differences and upholding national security as the first duty of this government, we can build a long-term economic relationship with China that works in the national interest.”