LONDON (Reuters) – British finance minister Rachel Reeves presented her first budget statement to parliament on Wednesday, announcing a series of tax rises and changes to the fiscal rules to allow for more borrowing to boost investment.
Below are the main points from her speech:
NEW FISCAL RULES
Reeves relaxed the government’s self-imposed fiscal rules in an effort to keep in check the current budget deficit, which measures the difference between revenues and day-to-day spending.
She said her “stability” rule will bring the government’s current budget into balance by the 2029/30 financial year. From there, it will commit to run a balanced current budget in the third year at every budget.
TAX ON BUSINESS
From April 2025, businesses’ social security contributions will increase by 1.2 percentage points to 15% – a change that could potentially hurt wages and hiring.
Reeves also reduced the threshold at which businesses start paying national insurance social contributions on each workers’ salary from 9,100 pounds ($11,797.24) per year to 5,000 pounds.
The combined changes will raise 25 billion pounds per year by the end of the forecast period, Reeves said.
TAX ON THE RICH
Reeves said a freeze on the inheritance tax threshold freeze would be extended until 2030. She also announced plans to bring inherited pensions into inheritance tax from 2027, and that relief for companies and farms would be limited to 1 million pounds.
She also closed exemptions that let wealthy, often foreign residents, avoid tax on overseas income, helping to raise 12.7 billion pounds ($16.47 billion) over the next five years.
GROWTH
The Office for Budget Responsibility said it expected the economy to grow by 2.0% in 2025, slightly up from the 1.9% it had forecast in March.
It forecast 1.8% growth in 2026, 1.5% in 2027 and 2028, compared with previous forecasts of 2.0%, 1.8%, and 1.7% respectively.
FUEL TAX FREEZE
Reeves said that a temporary five-pence cut in fuel duty would remain in place, citing global uncertainty and a high cost of living. Duty paid on motor fuels has been frozen since 2011, except for a temporary cut in the 2022/23 tax year.
($1 = 0.7714 pounds)
(Reporting by Suban Abdulla)
