London, UK: Chancellor of the ExchequerRachel Reeves announced the biggest tax increases in three decades in her first budget, raising tax by 40 billion pounds a year, most of it falling on businesses.
Initial investor reaction to Reeves’ speech show most taking her plans well, with government bond prices rising further as she addressed parliament. Reeves said she would raise the rate of social security contributions paid by employers by 1.2 percentage points to 15% from April next year, and lower a threshold at which firms start to pay it – moves which would raise an extra £25bn a year in five years’ time.
Reeves announced a string of other revenue-raising moves including changes to the tax rules on capital gains and inheritances and tax paid by private equity executives and non-domiciled residents. But she ruled out making more individuals pay basic and higher income tax rates by extending a freeze on the threshold for payments beyond its scheduled expiry in the 2028/29 tax year and extended a freeze on fuel duty for another year. Logistics UK and the Road Haulage Association have welcomed the government’s decision.
Logistics UK’s chief executive David Wells said: “Nothing moves without logistics: the sector supplies our hospitals, schools, factories, shops and homes with everything they need, everywhere, every day. The sector is vital to any plans to stimulate growth across the economy, and this respite is welcome news for a sector already seeing increasing business failures over the last year.
“The sector operates on very narrow margins – often only 2.5% – with fuel representing a large proportion of the weekly operating cost for hauliers.
“Logistics powers every part of the UK’s economy – it is the UK’s system for growth – and today’s announcement should drive confidence in our sector’s ability to deliver for its customers.”
A statement from the RHA said: “We welcome the Chancellor’s announcement to continue the fuel duty freeze, from today’s Budget, after much campaigning by the RHA over several weeks.
“With operating costs increasing, margins tightening and the direct link between higher movement costs and inflation, the last thing these vital businesses needed was a rise in fuel duty.
“Fuel prices continue to put a massive strain on budgets with diesel prices higher here than in any EU member state. More could still be done to support these businesses, the essential users of diesel for whom no other affordable choice of fuel exists. This would go some way to reducing some of the pressures that have driven consumer prices higher.”
In the House of Commons Reeves said that continuing the duty freeze and 5p a litre cut would lose the Treasury £3bn in revenues. However, she said that increasing duty while the cost of living remains high and with a backdrop of global uncertainty, “would be the wrong choice for working people”.
Key budget announcements
- The budget raises taxes by £40bn
- National Insurance contributions for employers will increase by 1.2% to 15% from April 2025
The point at which employers start paying NI will fall from £9,100 a year to £5,000 a year. This will raise £25bn per year - The lower rate of capital gains tax on the sale of assets will increase from 10% to 18%. The higher rate will go from 18% to 24%
- The minimum wage for people 21 and over will rise by 6.7% to £12.21 an hour. Workers aged 18 to 20 will see their minimum wage increase by 16.3% to £10 an hour
- Businesses will get an increase in employment allowance, which will mean 65,000 employers will not pay any National Insurance at all next year with the allowance growing from £5,000 to £10,500. This will mean more than a million businesses will pay the same or less than they did previously
- Business rates relief will fall from the current 75% down to 45% but only for retail, leisure and hospitality businesses
- Fuel duty will be frozen this year and next, with the existing 5p cut maintained
- The Office for Budget Responsibility predicts UK GDP growth to be 1.1% in 2024, 2.0% in 2025, 1.85% in 2026, 1.5% in 2027, 1.5% in 2028, 1.6% in 2029.
