TL;DR – Budget 2025 Latest
- Chancellor Rachel Reeves is under pressure to address the UK’s economic issues, with potential tax rises and spending cuts on the horizon.
- Key proposals include revising inheritance tax regulations, modifying income tax thresholds, and introducing charges on landlords’ rental profits.
- Other considerations may involve adjustments to VAT rates, a possible mansion tax, and measures to alleviate rising energy costs.
- In the face of American capitalism the Chancellors hands are tied, she can’t increase taxes on American corporates, as part of the pact with Trump.
Budget 2025: What tax rises and spending cuts could Rachel Reeves announce?
As Rachel Reeves’ second budget fast approaches, speculation about tax rises and spending cuts is reaching fever pitch.
On 26 November, the chancellor will set out her plan to address the UK’s growing economic hole as the country deals with high inflation and higher-than-expected government borrowing.
In mid-October, she said in an interview that she was looking at both tax rises and spending cuts in the budget after she was briefed on the scale of the fiscal black hole she faces.
She has signalled she will target asset-rich households, rather than earnings, as she said those with the “broadest shoulders” should contribute more to balancing the books.
Here’s a look at what the chancellor could announce in the budget:
Inheritance tax
A lifetime cap on the value of gifts someone can pass on before they die is being considered by the Treasury, it is reported.
Currently, there is no charge on gifts if the donor survives seven years but a cap – possibly about £100,000 – on how much people can give before they are taxed could be introduced.
Ms Reeves is also said to be considering extending the seven-year period before inheritance tax has to be paid to 10 years or even longer.
The taper relief rate (the tax discount for living at least three years after giving a gift) is understood to also be under review.
Income tax
The Resolution Foundation think tank, which is close to the government, said Ms Reeves should cut national insurance by 2p and add it to income tax.
That would “protect workers’ pay packets” as it would help level the playing field by taxing different forms of income such as from property, pensions and the self-employed – and raise £6bn, the think tank said.
Influential Labour think tank the Fabian Society has also urged Ms Reeves to raise £12bn by extending the freeze on income tax thresholds for another two years, after it is set to end in 2027/28 – something she committed to at last year’s budget.
This is dubbed a “stealth tax” as it pushes more people into higher tax brackets as wages rise, without actually raising taxes
LLPs
The chancellor is reportedly considering imposing a charge on limited liability partnerships (LLP) to raise £2bn.
LLPs are used by about 190,000 people, including lawyers, GPs and accountants, to be considered self-employed, exempting them from employers’ national insurance.