Yesterday, Rachel Reeves delivered her first budget as chancellor – a historic moment as both Labour’s first budget in 14 years and the first ever to be presented by a female chancellor. Setting out her vision to “restore economic stability and begin a decade of national renewal”, the chancellor announced tax increases amounting to £41 billion over the next five years, alongside significant investment plans for infrastructure, the NHS, and education.
Among the most notable changes is a substantial reform to employer national insurance contributions, which will rise to 15.0% from April 2025, while the earnings threshold will reduce from £9,100 to £5,000. This measure alone is expected to generate nearly £25 billion annually by 2028/29.
The chancellor has also introduced changes to the government’s fiscal rules, adopting a new approach that considers both assets and liabilities when measuring public sector debt. This adjustment aims to provide a more complete picture of the nation’s finances and create additional room for investment while maintaining control over day-to-day spending.
Despite these revenue-raising measures, the Office for Budget Responsibility projects that increased spending will keep government borrowing above £70 billion in 2029/30. In their words, “this budget delivers a large, sustained increase in spending, taxation, and borrowing.”
We’ve prepared a comprehensive overview of the budget that breaks down all the key changes. You’ll find this available to download here, providing clear information on the various tax changes and other important measures announced yesterday.
Our team will be reviewing how these changes might affect our clients’ financial plans and will discuss any necessary adjustments during upcoming planning meetings. If you have any immediate questions or concerns about how these changes might affect you, please don’t hesitate to get in touch.
