How to fight back against Reeves’s bombshell Budget

From capital gains tax to stamp duty, Telegraph Money breaks down one of the biggest tax-raising Budgets in history

Rachel Reeves has now made history by becoming the first female Chancellor to deliver the Budget. During an hour-plus stint at the despatch box, she also revealed one of the biggest tax raids in living memory.
Beginning her speech, Ms Reeves said that her faith in Britain burned “brighter than ever”. She then proceeded to burn a hole in the pockets of workers and retirees alike by announcing £40bn of tax rises.
There was bad news for employers and business owners as their National Insurance contributions will increase, leaving a very real danger that the cost will be passed on to employees.
Capital gains tax will almost double for low earners, hitting workers in company share schemes hard.
Grieving families were also targeted, as pensions will be moved into the scope of inheritance tax, adding to the burden of providing for loved ones left behind.
In addition, Ms Reeves took aim at homebuyers, drinkers and smokers, while simultaneously changing fiscal rules to borrow another £50bn for investment projects.
Telegraph Money runs through what has changed – and what you could do about it.
The Chancellor announced a multi-billion pound raid on businesses by increasing the rate of National Insurance contributions for employers.
Employers start paying National Insurance contributions (NICs) at 13.8pc when an employee’s pay exceeds £9,096 a year.
From April, the rate will increase to 15pc, and the salary at which it becomes due will also be reduced to £5,000 to raise £25bn for the Government.
According to advisers Barnett Waddingham, an employer will now pay an extra £926 in National Insurance for an employee earning £34,000. This will jump to £1,226 for someone on £60,000, rising to £1,706 on a £100,000 salary.
Each example includes £615 that must be paid due to the new lower earnings threshold.
The total amount would be offset in some cases by an increase to employment allowance, a government programme which helps eligible businesses reduce their National Insurance bill.
To see how much more expensive you’ll be to employ, use our employer National Insurance calculator.
Louise Jenkins, managing director at Alvarez and Marsal, said it would be a “significant burden” for businesses.
“The combined cost of the employer National Insurance changes for a business with 50 employees will be around £43,000, and for a business with 200 employees will be just over £173,000,” she said.
“The impact is slightly offset by the increase in the Employers Allowance, which most employers regardless of their size will now be able claim. Government figures suggest that 865,000 businesses will pay no employers NIC next year as a result of the changes announced today.
“Faced with difficult choices, some employers may need to consider cost saving measures such as raising prices, which could contribute to inflation, or reducing their wage bills through cuts to jobs or hours.”
Andy Chamberlain, of the Association of Independent Professionals and the Self-Employed, said the move was a “hammer blow” for workers like contractors and freelancers.
“[It] will leave a huge dent in the finances of more than 700,000 umbrella company workers, who cover the cost of employers’ National Insurance through their rate of pay.
“Not only will they be covering a higher headline rate of employers’ National Insurance from next April, but they’ll be paying it on an extra £4,100 of their earnings.
“For many umbrella workers, this will cost them in excess of a thousand pounds per year.”
If you own or run a business, make sure you’re claiming any employment allowance that you’re entitled to. This doubled from £5,000 to £10,500 during the Budget.
As expected, capital gains tax will increase for all taxpayers as Ms Reeves launches a raid on investors. The rise will be twice as high for low earners as it is for high earners.
Under the new plans, sellers of shares and other valuable assets will be hit by higher rates.
Basic-rate taxpayers will pay 18pc, up from 10pc, while higher-rate taxpayers will pay 24pc, up from 20pc. These rates will match the capital gains tax charged on the sale of second homes.
Based on a £20,000 profit from selling shares, the increase would cost a low earner an extra £1,360. High earners would pay £680 more than before. You can see how your own tax bill would be affected with our capital gains tax calculator.
Experts have already warned it will be a blow to hundreds of thousands of low income workers in company share schemes.
Robert Salter, of accountants Blick Rothenberg, said the change was likely to be counterproductive because it would actually lower tax receipts.
He said: “The reality is that most capital gains transactions can be delayed by owners, or owners can simply move overseas, and the increase in rates will just encourage such behaviour on the part of owners and entrepreneurs.”
Capital gains tax is only applied when you sell, so in effect it’s a voluntary tax. If you are unhappy with the current rate, you can keep hold of your assets. You should always max out your pension and Isa allowance. Any assets held inside these accounts grow free of capital gains and dividends tax. Remember you can share assets between married partners. Read six more tips to reduce your bill.
Grieving families were firmly in the Chancellor’s crosshairs as she announced changes that could see higher charges.
Currently, the hated “death tax” is charged at 40pc on estates over £325,000, or £500,000 if they include a property left to direct descendants. Nothing is due for gifts made between spouses, or those made more than seven years before death.
Inheritance tax receipts are already at record levels, with the Treasury raking in £2.2bn in the last three months alone.
The big news is that pensions, which are currently excluded from inheritance tax, will be counted as part of your estate from April 2027.
Andrew Tully, of Nucleus said: ‘This is a massive change to the way people think about pensions and passing on their unused wealth to family.
“Many may now wish to take more withdrawals from their pensions within the basic rate income tax band and spend, gift or shelter that income taken.”
Business and landowners will also be hit with inheritance tax. Agricultural property and business properties will still benefit from some relief, but this will be capped at £1m.
After that, 50pc relief will still apply and inheritance tax will be levied on the remainder. It means a property worth £1.5m would now attract £100,000 in inheritance tax.
Christopher Groves, of law firm Withers, said: “Families of entrepreneurs and farmers suffered a kick in the teeth and are now expected to turn over 20pc of the businesses they build to the tax man on death.”
Neil Davy, of Family Business UK, said: “These changes are a betrayal of Britain’s hard working family business owners and farmers that will result in valuable businesses being closed, sold and jobs lost across the country.”
Ms Reeves also confirmed that inheritance tax thresholds would remain frozen for another two years until 2030.
There have always been ways to avoid inheritance tax, including giving money away at least seven years before death.
The raid on private pensions is particularly brutal. Since 2015 savvy savers have been filling their pension accounts because money left unspent can be passed on entirely tax-free in many cases. But the abolition of the lifetime limit on pensions means this particular loophole had just become too good. Savers could immediately stop paying into a pension, if you were doing so purely to avoid inheritance tax.As for money you’ve already got stashed, the choice is a bleak one. Take it out, and pay income tax at 40pc or 45pc now – or 40pc in death duties once you’re gone.
The Chancellor has confirmed that the deep freeze on income tax thresholds will continue until 2028, under plans taken on from the Conservatives. After this, she said thresholds would rise in accordance with inflation.
Maintaining thresholds is known as “fiscal drag”, as people see more of their pay rises disappear into the Treasury’s coffers.
Between 2010-11 and 2019-20, the tax-free allowance rose £6,025, jumping from £6,475 to £12,500. Between 2020-21 and 2027-28, it will have risen just £70.
Ms Reeves also confirmed that inheritance tax thresholds would remain frozen for another two years until 2030.
Although it means depriving yourself of income today, you can use pension contributions and ‘salary sacrifice’ schemes to lower your tax bill. Read our step-by-step guide on how to do this.
A £2bn Liz Truss-era scheme to reduce stamp duty was one of the few changes Rishi Sunak retained as prime minister.
The move increased the nil rate threshold at which the unpopular charge became due to £250,000, or £425,000 for first-time buyers.
However, this comes to an end in March, and Ms Reeves has decided not to extend it as she cashes in on home sales. This means the thresholds will shrink back to £125,000 and £300,000.
The charge will now be due on nine in 10 house sales, leaving the average homebuyer with an extra £2,500 to pay. First-time buyers could pay an extra £11,250.
But the most dramatic change will be seen by those buying a second home or buy-to-let property. These transactions have been subject to a 3pc stamp duty surcharge, rising to 5pc as of October 31.
Telegraph Money’s stamp duty calculator shows how this will affect you.
Although the increased rate takes effect from midnight tonight, things will get even worse in April 2025 so it’s worth trying to complete property transactions before then. Here are other tips on reducing your stamp duty bill.
In a surprise move, the Chancellor maintained the freeze and 5pc cut on fuel duty announced by the Conservative government in 2022. It will last for another year.
Duty is applied to fuel in vehicles and heating your home. It’s already included in the price and is charged in addition to VAT.
A rumoured 7p increase could have cost motorists almost £4 on a tank of fuel, or £175 a year, according to the Campaign for Better Transport
John Cassidy, of Close Brothers Motor Finance, said: “As the cost of car ownership continues to rise, this is one less thing for drivers to worry about in the short term.
“Whilst the freeze will ease some pressure on motorists’ wallets, the Government will have an eye on the horizon and its planned 2030 ban on the sale of new petrol and diesel cars.”
There was mixed news for drinkers and smokers. Prices for non-draught alcoholic drinks will rise with inflation, but Ms Reeves announced a cut to draught products. She promised this would offer a “penny off a pint in a pub”.
However, there was a 10pc tax hike on hand-rolling tobacco and a flat levy rate introduced on liquid vapes.
Passengers currently enjoy a £2 cap on bus fares, which the Conservatives implemented until the end of 2024.
However, Sir Keir Starmer announced on Monday that this will increase to £3 until the end of 2025. It will lead to higher fares, but could also cost the taxpayer around £300m next year.
Manchester mayor, Andy Burnham, said that his city will maintain the £2 cap next year.
Earlier this week, it was announced that millions of workers on low incomes will receive a wage increase. The Chancellor also confirmed the move during the Budget.
The national living wage, paid to those aged 21 and over, will increase from £11.44 to £12.21 an hour from April 2025. As a result, over three million workers will see their wage jump by £1,400 a year.
The national minimum wage, paid to those aged 18-20, will also increase from £8.60 to £10 an hour. It will give full time workers an extra £2,500 as the Government moves towards a single rate of minimum pay, phased in over several years.
Businesses have warned the move will harm Britain’s competitiveness.
As expected, the Chancellor maintained the Labour party’s commitment to the triple lock. She confirmed that both the old and new state pensions would increase by 4.1pc from April.
This will give more than 12 million pensioners up to £470 next year.
Ms Reeves also announced the abolition of non-dom status.
It currently offers generous tax breaks to people living in the UK, but whose permanent tax residence is abroad. However, this will end from April 2025.