Budget 2024: What Will Rachel Reeves’ Budget Mean for Your Wallet?

Rachel Reeves, Labour's chancellor, is set to deliver the party’s first Budget in 15 years on 30 October, as speculation grows over the measures that could be included. The fiscal announcement comes in the context of a £22bn public spending deficit, which Reeves highlighted in July.

Prime Minister Sir Keir Starmer has warned that the Budget will be “painful” but necessary given the current economic situation. Tax increases and potential spending cuts are expected, though there is a firm commitment not to raise income tax, national insurance, or VAT. This leaves the chancellor searching for alternative ways to raise vital revenue.

Experts from the Institute for Fiscal Studies have indicated that Reeves has “little room for manoeuvre,” suggesting that her budget may introduce smaller, incremental changes designed to collectively create a significant impact.

Fixing the foundations of our economy to make every part of the country better off.

That’s the change we are delivering. https://t.co/nvBS4Yk2O2

— Rachel Reeves (@RachelReevesMP) October 4, 2024

Budget 2024 Potential Announcements

Here are some key proposals that Chancellor Reeves may include in her upcoming budget:

1. Capital Gains Tax Reform
   • Currently, Capital Gains Tax (CGT) applies to profit from selling assets like property and stocks, with rates varying from 10% to 24% based on income levels.
   • Potential reforms could align CGT more closely with income tax rates, predicted to generate an additional £5.2 billion annually.
2. Pension Tax Relief Adjustments
   • The Chancellor may consider implementing a flat 30% pension tax relief rate, affecting higher earners who would then pay 10-15% in tax.
   • This change could raise approximately £3 billion annually and benefit basic rate earners by boosting their pension contributions.
3. Inheritance Tax Revisions
   • Currently, only 5% of estates incur inheritance tax, which is levied at 40% on amounts exceeding £325,000.
   • Simplifying exemptions could potentially increase revenue by £4.8 billion by 2029.
4. Welfare Spending Cuts
   • Labour aims to reduce welfare expenses, with Reeves likely using the budget to address this goal. Measures may include cracking down on benefit fraud, potentially saving £1.6 billion over five years.
5. Fuel Duty Increase
   • The Chancellor might consider reversing a previous 5p cut to fuel duties, which could generate around £2 billion. However, this could lead to higher costs for motorists in the short term.
6. Business Rates Reform
   • Labour has pledged to revamp the business rates system to promote fairness among high street and online businesses, likely closing loopholes while ensuring overall revenue remains unchanged.
7. Changes to Private Equity Taxation
   • Addressing the ‘carried interest’ loophole, Labour plans to impose a 45% tax on private equity fund managers, potentially raising around £600 million annually.

What to Expect

Given the fiscal constraints and Labour’s promises not to raise major taxes like VAT, income tax, or national insurance, Rachel Reeves will likely introduce a range of smaller adjustments, from tax reforms to spending cuts.

These combined could have a significant impact. While details remain uncertain, the Budget is expected to reflect Labour’s broader ambition of tackling inequality while navigating the challenges of public spending.