According to government sources, the £4obn includes the £22bn left by the Conservative administration and an extra top-up for areas such as schools, hospitals and defence. Rachel Reeves has said there will be "no return to austerity", suggesting most of that gap will need to be filled with tax rises rather than spending cuts.
A new budget rule that lets the Treasury increase borrowing by up to £53bn is expected to allow investment in a range of infrastructure projects. Here we explore the potential measures.
What tax changes might be in the budget? Capital gains tax Taxable capital gains are concentrated among a small number of people and is levied on the increase in the value of an asset between its purchase and disposal. In 2022-23, there were only 350,ooo individuals - o.65% of the adult population - realising taxable gains, raising about £15bn a year. The scope of the tax has increased after the previous government reduced the annual exemption from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024. For those with gains above the threshold, the levy is 24% from selling additional property, or 20% on profits from assets such as shares. There has been speculation that both rates could increase.
National insurance contributions by employers Employers pay national insurance contributions (NICs) on their workers' earnings at a rate of 13.8%.
This could rise to 15.8%, generating £20bn, if speculation is correct. An increase of one percentage point would raise an estimated £8.5bn. Businesses have argued that raising NICs for employers will make it harder to hire staff and create jobs. Research shows this can happen, though only over the longer term. In the meantime, deterring employers from hiring and bidding up wages will please the Bank of England, which might overcome concerns about an overheating labour market to cut interest rates more quickly.
This story is from the October 30, 2024 edition of The Guardian.
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This story is from the October 30, 2024 edition of The Guardian.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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