Hidden dangers of Rachel Reeves' nightmare Halloween Budget revealed – what it really means for your finances

10/30/2024 05:00 PM

RACHEL Reeves used Labour's first Budget in 15 years to push levies to a record high — as she unveiled a list of Halloween horrors for taxpayers.

The Chancellor also opted to dramatically hike borrowing and spending — pledging to fix the country's finances along with the NHS and schools.

But critics warned she was on a hiding to nothing as growth will remain sluggish for another five years in the wake of the £40billion tax rise.

Millions of Britons will be caught in the cross-hairs as entrepreneurs, travellers and homebuyers all take a huge hit in the pocket.

A defiant Ms Reeves, who unveiled the biggest tax-raising Budget since 1993, said: "I have made my choices — the responsible choices — to restore stability to our country."

The plans will see the tax burden at a historic high — increased by an average £32.3billion a year.

Borrowing rules have been ripped up and spending will grow by £70billion a year over five years.

Tories said the £40billion is the equivalent of hitting every household with a £1,400 hike.

Tory leadership contender Robert Jenrick said Labour had broken its election promise not to hike taxes, carrying out the "biggest heist in modern history".

In a painful attack on business, the majority of the haul will come from a damaging increase in National Insurance paid by employers.

Hiking the levy from 13.8 per cent to 15 per cent will bring in £25billion a year over the next five years.

Employers must also start paying when an worker's salary hits £5,000, down from £9,100.

Business chiefs have warned they may have to get rid of staff or even close as a result of the measure.

The independent Office for Budget Responsibility assumes firms will "pass on most but not all of higher tax costs to employees".

Millions of workers are now ready for a pay squeeze, as top economists warn the NI hike would be felt by staff via reduced rises.

The Institute for Fiscal studies said: "Somebody will pay for higher taxes, largely working people."

The watchdog says it estimates businesses will pass on 60 per cent of the higher costs to workers — through lower wages — and to consumers via higher prices.

The Conservatives claimed the National Insurance hike was a clear breach of Labour's manifesto pledge not to raise taxes on working people through income tax, VAT or National Insurance.

Tory leader and former PM Rishi Sunak said: "They said they wouldn't raise taxes on working people, they have.

"Broken promise after broken promise and it is the working people of this country that will pay the price."

He added that "never in the history of our country will taxes be higher than they are under this Labour government".

Speaking of the Chancellor and the "£22billion black hole" she said was left by the Tories, Mr Sunak went on: "Labour's claims about their inheritance are purely ludicrous.

"These are her choices.

"So, stop blaming everyone else and take responsibility."

Ex-Tory Chancellor Philip Hammond told Sky News: "They've clearly breached their manifesto pledge."

But there was some relief for small businesses, who said they had been heard "loud and clear" as 865,000 of them will pay no NIC after the relief amount was raised.

Ms Reeves told the House of Commons: "I do not take this decision lightly.

"We are asking business to contribute more, and I know there will be impacts of this measure felt beyond businesses."

She also announced an increase to capital gains tax — paid on profits when an asset or gift is sold — which will raise £2.5billion for Treasury coffers.

New measures for inheritance tax — which will take in pension pots from April 2027 — along with reforms to agricultural and business property relief will raise £2billion a year.

Home-buyers hit

A manifesto commitment to impose VAT on private school fees will raise £1.7billion by the end of the decade.

Home buyers will face higher costs, with first-time buyers paying stamp duty from £300,000 rather than the first £425,000, which was introduced under the Tories.

For other buyers, the threshold will come down from £250,000 to £125,000 from March.

From today, people buying a second home will pay an extra five per cent on top.

Air passengers will see an extra £2 added to the cost of an economy ticket for a short-haul flight by 2026/27 as duty is increased.

Costs will also see £1 added to seats on domestic flights and £12 for long-haul journeys.

And Ms Reeves mocked Mr Sunak — who has a home in California — when she said private jet users will face a 50 per cent hike in air passenger duty.

Wealthy passengers currently pay a duty rate of £78 for short-haul and £581-£607 for long-haul trips.

She said: "But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50 per cent.

"That is equivalent to £450 per passenger for a private jet to, say, California."

There was also a pledge to abolish the "outdated" non-dom tax regime, which will kick in from April next year.

The Chancellor will introduce a residence-based scheme, which critics have said could deter investors.