A new tax calculator (see below) could reveal whether you stand to gain or lose out under Labour’s Budget after the government unveiled its economic strategies, including changes in taxation and spending, on Wednesday.
The Chancellor Rachel Reeves announced today a staggering £40 billion increase in taxes, attributing these drastic measures to plugging a £22 billion shortfall allegedly inherited from their Conservative predecessors.
Businesses are particularly concerned as the bulk of this revenue will come from an estimated £25bn hike in employers’ National Insurance contributions. This change has raised alarm among some business owners.
Employers are set to be hit with a bigger bill for their employees’ National Insurance payments, facing a hike to 15% beginning April 2025, up from the current rate of 13.8%.
Moreover, the threshold for when contributions kick in is being lowered dramatically, from £9,100 to just £5,000 per annum a move described as a “difficult choice” by Reeves, who insists tough calls are necessary for putting the economy back on a stable path, reports the Express.
While income tax and national insurance rates remain static, thresholds too have been kept on hold. This freeze on personal allowances ensures that anyone getting a raise will experience higher taxation amounts due to ‘fiscal drag’.
Find out how much better or worse of you could be following the Chancellor’s Autumn Budget using out interactive tax calculator below
Smokers will feel a pinch as the duty on cigarettes is set to rise by RPI inflation (currently at 2.7%) plus an extra 2%.
Furthermore, those who prefer rolling tobacco will see duties surge by an extra 10%.
There’s a mixed bag for pub-goers, as the duty on draught products like beer and cider is set to drop by 1.7%, equating to a saving of 1p per pint. However, wine and spirits are set to see a price hike, increasing in line with the RPI, which translates to an extra penny for a small glass of wine or measure of whisky.
Despite rumours that the Chancellor was planning to reinstate the 5p cut from fuel duty made by the previous government, it appears fuel duty will remain at its current rate for the foreseeable future.
This comes as think tanks suggest workers could be left worse off. The Office for Budget Responsibility (OBR), the government’s spending watchdog, has warned that the majority of the burden from the increase will likely fall on workers due to lower wages.
The OBR also suggested that consumers may feel the pinch due to higher prices.
Among other key announcements was a significant £22.6 billion injection into the day-to-day health budget. The capital budget is also set to receive a boost of £3.1 billion over this year and next, according to The Standard.
Half of the increase in government spending will be funded by a rise in borrowing, amounting to £32 billion (1% of GDP) per year, the OBR revealed.
For a more detailed breakdown of the Budget announcements, click here.