A penny off a pint in the pub, keeping the cost of petrol down and a pay boost for the country’s lowest paid workers are just some of the measures revealed in the Budget.
There was a lot in Labour’s first Budget in more than a decade and the first one ever from a female Chancellor.
Rachel Reeves delivered her statement earlier today, announcing the biggest hike in taxes since 1993 – up a walloping £40,000,000,000.
Both Reeves and Prime Minister Sir Kier Starmer say whacking up taxes is the only ‘responsible’ thing to do to get the public finances back on track after 14 years of Conservative rule.
Whether you believe the politics or not, today’s Budget will affect the pound in your pocket. Will you be better off? Or left feeling stung?
Metro’s consumer champion Sarah Davidson breaks down how people in different situations are affected.
Follow our live blog for the latest Budget updates
You’re working on the national living wage
Labour promised to protect workers from the worst of the tax hikes announced today.
And true to their word for around three million of the country’s lower paid workers, Reeves is bumping up the National Living Wage from £11.44 to £12.21 an hour from April next year.
It means an individual working 40 hours a week will get a pay rise from April 1, 2024 of £1,602 per year, according to analysis from tax firm Blick Rothenberg.
Younger workers will also see their pay go up, with 18 to 20-year-olds’ minimum wage set at £10 an hour from April, while under-18s and apprentices will get a minimum of £7.55 per hour.
You’re working and pay income tax and national insurance
Reeves stated boldly that she had made the decision to ‘protect working people from being dragged into higher tax brackets’ in this Budget by confirming that income tax and national insurance (NI) contributions thresholds will be unfrozen from 2028/29 onwards.
She said: ‘I say to working people: I will not increase your national insurance. I will not increase your VAT. And I will not increase your income tax.
‘Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.’
This is a bit misleading, even if technically true.
Firstly, the previous government had said income tax and NI thresholds were to remain frozen until 2028, so no change on that front.
Secondly, Labour is using the same smoke and mirrors trick employed by the Conservatives since 2022 when these thresholds were first frozen, rather than going up in line with inflation.
It’s called fiscal drag and it’s a stealth tax.
One way for the Treasury to increase the overall amount of income tax paid by individuals would be to raise the rate.
The other way is to let inflation do the job for you.
The cost of living crisis saw inflation peak at over 11% and we’re all aware of what that’s done to the cost of the weekly food shop, bills and mortgages.
Millions of people have asked for, and got, a pay rise over the past couple of years – helping them to cover their higher living costs.
By freezing income tax bands though, that means millions more people are dragged into paying more national insurance and more income tax.
Here’s how it works.
If you earn up to £37,700 this year, you pay income tax at 20% and national insurance at 8%.
If you were to get a pay rise of £2,300 taking you to £40,000 next year, you would become a higher-rate taxpayer.
You will have to hand over 40% of that pay rise to HMRC, plus 8% in national insurance.
Under the rules announced today, this means you’ll pay £920 more income tax and £184 more national insurance, leaving you with £1,196 of your pay rise to take home.
If income tax bands had been raised in line with inflation at September’s figure of 2.6%, the basic rate would have applied to income up to £38,680.
Along with national insurance, you would have handed over £380 less to HMRC.
And there you have it. You might be earning more, but you’re keeping less.
You’re working or trying to get a job
While employee national insurance contributions are staying at 8%, Reeves has said companies will have to pay another 1.2% of their employees’ salaries to HMRC, taking their contributions up to 15%.
Along with the rise in the national living wage and the cost of training an apprentice, it’s very likely that some employers will have to cut jobs and hire fewer people to cover their higher costs.
Robert Salter, a director at Blick Rothenberg, warned: ‘This is a significant real increase on the costs faced by businesses and could easily result in increased unemployment over time.’
The Low Pay Commission estimates around 1.6 million employees are paid at or below the minimum wage.
Salter’s colleague Heather Powell said those working in the retail, leisure, hospitality, cleaning and maintenance sectors are most at risk.
‘The additional cost for employers in terms of increased income tax, employee’s national insurance and employers’ national insurance will be £690,’ she said.
By her reckoning, that means consumers will see prices in these sectors rise by more than 6% in April next year, or job losses.
It could also mean pay rises outside these sectors are less likely and bonuses are lower.
You’re working for a small firm
Reeves’ Budget is putting the bulk of her £40,000,000,000 tax rises onto businesses.
Along with higher national insurance, from April next year businesses will have to pay national insurance on each employee’s salary over £5,000.
Currently employers’ national insurance contributions don’t kick in until a worker earns £9,100.
According to Blick Rothenberg, a business employing just five people earning £50,000 each will face an annual NIC increase of over £5,500.
To soften the blow for smaller firms, government has said it will raise the employment allowance from £5,000 to £10,500 – easing the liability for businesses with smaller or less expensive headcounts.
Even so, it’s likely most companies will see their profits pinched. That means lower or no pay rises for employees, job losses and hiring freezes.
You’re a homeowner
The Budget focused heavily on access to affordable housing, cementing previously announced plans to boost the number of new homes being built – particularly social housing.
Reeves also announced changes to the Right to Buy discount, sweeping reform of planning rules and £3,000,000,000 in guarantees designed to support smaller housebuilders to help deliver 1.5 million new homes over the next five years.
Housing is a tricky one – promises can be made but it takes years for investment to result in the actual availability of homes to buy or move into.
While local authorities are now back under mandatory housebuilding targets, private housing developers are financially incentivised to limit the stock of new homes to keep prices from falling.
Perhaps more relevant for homeowners was the forecast in the Office for Budget Responsibility’s report showing that policies from this Budget will modestly push up inflation.
Laith Khalaf, head of investment analysis at AJ Bell, said: ‘This does make for higher interest rates, and hence mortgage rates.’
That said, mortgage rates have stabilised considerably over the past two years.
Research by mortgage broker L&C Mortgages shows best buy mortgage rates are now around the same as they were in September 2022, despite the Bank of England base rate rising from 2.25% to 5% today.
According to Compare the Market, homeowners could save around £330 a month on mortgage repayments if they remortgage from their lender’s default standard variable rate – typically around 8% – to a five-year fixed rate of around 5.38%.
That’s almost £3,960 per year.
This is based on a mortgage debt of £178,523 per household and a 30-year mortgage term.
You’re a renter
Reeves announced that anyone buying a second property or additional dwelling will have to pay an extra 5% stamp duty from tomorrow October 31, up from its current 3%.
This should mean more homes for sale go to first-time buyers and those moving house, in theory.
But there is a flipside to this, which is likely to hit anyone renting their home privately as well as social tenants.
There are two reasons for this.
First, it makes the cost of investing in private rented homes even higher than it already is for landlords.
Since the start of 2016, landlords have sold more than 1.5 million properties across the UK, according to property firm Hamptons.
In a sector battered by the loss of tax reliefs, higher mortgage rates and stricter rules, that is going to reduce supply even further.
Analysis by Capital Economics suggests that increasing stamp duty on rental properties from 3% to 5% will see a net loss of half a million homes to rent over 10 years.
Ben Beadle, chief executive of the National Residential Landlords Association, said: ‘Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense.
‘This will not help the huge number of tenants for whom homeownership is still a distant dream.’
A report published by the Institute for Fiscal Studies last year found renters are considerably more likely than owner-occupiers to have low living standards on a variety of measures.
Social and private renters have poverty rates of 46% and 34% respectively, compared with 12% for owner-occupiers.
‘The Chancellor has failed to heed the warnings that higher taxes on the rental market lead only to rents going up,’ said Beadle.
‘What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.’
The second downside will be for social tenants.
After remaining frozen for four years, local housing allowance was finally increased in April this year.
But today’s Budget has reinstated the freeze, making it even less affordable for private landlords to let homes to tenants on housing benefit.
Tenant rights group Generation Rent estimates that average rents will have risen by around 8.5% in England between April this year and late 2025.
‘By then they will be 14.2% higher than the reference rents used to determine the April 2024 LHA rates,’ said the group’s Dan Wilson Craw.
‘Building social homes will take a while to make an impact. Freezing local housing allowance will return housing affordability close to its current unsustainable levels just 18 months after the LHA increase takes effect.
‘A family renting a typical two-bedroom house will have to find around £1,370 each year more from other sources to cover rising rent.’
You’re an unpaid carer
Labour is traditionally more supportive of welfare payments but today’s Budget didn’t focus too much on benefits.
The exception was for those claiming carer’s allowance, who will be entitled to earn the equivalent of 16 hours at the National Living Wage from next April.
Around 175,000 unpaid carers claim carer’s allowance and work, according to campaign group Carers UK.
They say two in five carers had been forced to give up work or work less than they wanted to because of the current earnings limit.
Upping the limit to 16 hours will allow carers to earn £195 a week without losing their benefit entitlement – the biggest uplift since the benefit was first created in 1976.
You’re repaying debts from your universal credit
At the moment the Department for Work and Pensions can deduct up to a quarter of your universal credit payments each month to cover debt repayments.
That might be because you were overpaid benefits in the past and spent them, or because you’re behind with bills, child maintenance or rent. There are several other reasons that mean you’re hit by this rule.
Today Reeves said that debt repayments will be capped at 10 per cent of your monthly universal credit payment, after the Joseph Rowntree Foundation and the Trussell Trust argued that people weren’t able to cope.
It should mean around 1.2 million of the poorest households will keep more of their award each month, with those who benefit keeping an average of £420 more a year.
You’re claiming State pension
After controversially scrapping the Winter Fuel Payment for millions in July, there was some better news in the Budget for pensioners.
Both the basic and flat rate State pension will go up by 4.1% in April – more than double the uprating for those claiming working age benefits who will see payments rise 1.7%.
It should mean just over 12 million pensioners will gain up to an extra £470 next year thanks to Labour delivering on its manifesto pledge to keep the triple lock in place and raise the State pension in line with the highest of inflation, earnings or 2.5%.
Pension credit will also rise by 4.1%from around £11,400 per year to around £11,850 for a single pensioner.
If you’re eligible, it’s worth registering to claim pension credit. Not only will it boost your income in retirement, it means you will still be able to claim the winter fuel payment worth up to £300, and may be entitled to a free TV licence and dental treatment.
You’re a saver
Reeves has confirmed there will be no change to the annual tax-free allowance for money held in individual savings accounts (Isas), junior Isas and child trust funds until 2030.
UK adults can save £20,000 a year into an Isa currently without paying income or capital gains tax. The junior Isa allowance will remain at £9,000.
Half-baked plans for a UK Isa under the previous government have been binned, as expected.
You’re an investor
There was serious worry that Reeves and Starmer would slap much higher taxes on those who Starmer suggested were not ‘working people’ last week.
In an interview with Sky News, the Prime Minister seemed to suggest that stock owners ‘wouldn’t come within [his] definition’ of working people and were at risk of being disproportionately hit by today’s Budget.
Downing Street later clarified that he didn’t mean everyone with stocks and shares.
Those whose income does come from investments – very often those in retirement who hold their savings outside a pension or Isa – are likely to be relieved that a hike in capital gains tax wasn’t as bad as many feared.
It will still bite though. The lower capital gains tax rate rose immediately from 10% to 18%, while the higher rate has gone up to 24% from 20%.
This will impact anyone selling investments, property other than their primary residence and company shares, though money held in an investment Isa won’t be affected.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, warned there is still some uncertainty.
‘Wealthier investors who have maxed out their Isa allowances are now facing increased tax on equity gains,’ she said.
‘While the hike was not as high as many feared it could be, ultimately this move is a backwards step and may prompt investors to take profits bit by bit by using their allowances to realise gains and parking this money elsewhere.’
Streeter also said the lack of action on individuals’ tax-free dividend allowance was a lost opportunity.
‘The UK market is an income king, and enjoys the highest dividend yields among its peers, including the S&P, DAX, CAC 40,’ she said.
‘But these benefits are being swallowed up by the low level of the dividend tax allowance, which had already been slashed from £5,000 in 2016 to £500 pounds today.
‘The chance has been lost to incentivise investment by increasing this allowance, especially given the government says it wants to encourage investment in UK assets.’
You have children at private school
Reeves confirmed that school fees will be subject to VAT at 20% from January, significantly pushing up education costs for the 6% of children in private school.
Shaun Moore, tax and financial planning expert at Quilter, said the average cost for a day pupil is likely to rise by around £3,100 a year.
He calculates that a couple will now need to earn at least £102,000 a year to be able to send two children to a private day school from next year.
Parents would need to earn £208,000 between them to pay the £102,000 average annual cost of sending two children to boarding school.
A sole earner would need a salary of £245,000 to send two children to boarding school and cover costs, said Moore, because they would lose more of their income to tax.
Private schools are also losing their charitable status and will see their business rates go up, which may mean they raise underlying fees in addition to charging VAT.
You’re planning to leave an inheritance
After weeks of speculation that Reeves would take an axe to inheritance tax (IHT) relief, her move to keep tax-free allowances on hold and the rate at 40% could be seen as good news.
This means you can still pass your entire estate (all your money and assets) to your spouse or civil partner tax-free.
Everyone can pass on up to £325,000 without incurring inheritance tax.
If you’re passing on a property to children or grandchildren you can pass on an additional £175,000 tax-free.
Combined with a spouse, this allows parents to pass on up to £1,000,000 before those inheriting have to pay inheritance tax.
Bear in mind that leaving these thresholds on hold has the same effect as for income tax – as property prices rise, more and more families will be dragged into paying the tax.
The biggest change for those with enough wealth to have to worry about it was Reeves’ decision to make any money left in a pension subject to inheritance tax.
At the moment, it’s possible to pass on just over £1,000,000 in a pension without it being counted as part of your estate.
From April 2027, that right will go.
Gary Smith, retirement specialist at wealth management firm Evelyn Partners, said it will mean many more people having to pay inheritance tax.
‘As defined contribution pension funds could now be subject to up to 40% IHT on death, we will probably see greater withdrawals from pension pots in the next 18 months.’
While that could save your beneficiaries from being hit by IHT, you still have to pay income tax on any money you take out of your pension.
‘Some savers in drawdown will have an eye on the frozen £50,270 threshold at which point their overall income from all sources will be taxed at 40%.’
You’re a non-dom
While we’re talking wealth, Labour has also made good on its promise to scrap non-dom tax status.
There are around 70,000 people living in the UK but who are not ‘domiciled’ here, meaning they don’t have to have to pay tax on foreign income and capital gains.
It has meant very wealthy individuals can hold their assets in offshore tax-havens without contributing to British taxes and still benefit from living in the UK and its public services.
From April next year, this will stop and everyone living in the UK for more than four years will have to pay the same income and capital gains tax as everyone else. Their assets will also be subject to inheritance tax.
Get in touch with our news team by emailing us at webnews@metro.co.uk.
For more stories like this, check our news page.
MORE : The winners and losers in the Autumn 2024 budget
MORE : I can’t help but feel cynical about the £1billion SEND spend
MORE : Rachel Reeves promises no return to austerity but I’m not so sure
Sign up to our guide to what’s on in London, trusted reviews, brilliant offers and competitions. London’s best bits in your inbox
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.