(Bloomberg) -- Rachel Reeves’ UK budget on Wednesday was historic for being the first delivered by a woman. But it was also notable for being among the biggest tax-raising events in recent decades, a move the chancellor said was necessary to fix the foundations of the British economy.
The Treasury estimates Reeves’ measures will raise taxes by an additional £41 billion ($53.3 billion) a year by 2030, with the overall burden hitting a post-World War II high on the way. The chancellor also increased annual spending by £74 billion and changed the rules guiding her decisions, paving the way for an extra £100 billion of investment over the next five years — a step change she promised would boost growth.
Here’s a rundown of some of the key measures the chancellor announced on Wednesday, and the Treasury’s estimate of their annual cost, saving or income generated by the 2029-2030 fiscal year, unless otherwise stated.
Policy Measures
National Insurance: In the biggest single revenue raiser of the budget, Reeves lifted the main rate of the payroll tax paid by employers to 15% from 13.8%, while lowering the threshold at which it’s due and adjusting some allowances. Income: £25.7 billion.
Capital Gains Tax: Reeves increased the main rates to 24% and 18% from 20% and 10%. There were also changes to business asset disposal relief and investors’ relief. Income: £2.5 billion.
Fiscal Rules: The chancellor changed the main measure of debt used to guide her requirement to get debt falling as a percentage of output, switching to public sector net financial liabilities from net debt ex-Bank of England.
Inheritance Tax: The government said unused pension funds and death benefits payable from pensions will be included in the value of estates from 2027, and announced reforms to reliefs for agricultural and business properties. Overall thresholds were frozen for an extra two years until April 2030. Income: £2.3 billion.
VAT on Private Schools: Fulfilling a much-trailed election promise, Reeves said she’ll remove the value added tax exemption on private school fees, starting in January. From April, private schools will also lose out on the business rates relief they previously enjoyed. Income: £1.8 billion.
Non-Dom regime: The chancellor built on her Tory predecessor’s plan to abolish the current regime, removing a tax discount available to non-doms on overseas income in 2025-26 and making other technical changes. The effects are deemed “negligible” next year, before kicking in the following year. Income: Peaks at £5.9 billion in 2027-28 before tailing off.
Oil & Gas Windfall Tax: Another pre-election tax was to close loopholes in an existing windfall tax on oil and gas companies. Reeves on Wednesday increased the rate of the tax by three percentage points to 38%, removed investment allowances except for decarbonization, and extended it until March 2030 from the end of March 2029 currently. Income: £955 million.
Private Equity: Following through on another manifesto pledge, Reeves increased capital gains tax on carried interest to 32% from April, and said she’ll apply income tax bands to carried interest from April 2026, closing off a loophole that allowed private equity fund managers to pay a reduced rate of tax on their bonuses. Income: £140 million in 2027-28.
Fuel Duty: A 5p cut to the levy that was set to expire was extended by a year. Reeves also maintained a freeze on inflation-linked increases. The freeze has been in place since 2011, but annual increases are baked into budget assumptions, so maintaining it is expensive. Cost: £3 billion next year.
Departmental Spending: Reeves promised extra spending for public services, including a £22.6 billion uplift in the National Health service budget next year, and £2.9 billion extra for defense. Cost: £55 billion.
Other Announcements: Reeves announced funding for compensation for victims of the infected blood scandal, whose cost peaks at £2.9 billion next year, and the post office scandal — at a cost of £1.75 billion over three years. A series of measures to collect more tax that’s due and crack down on tax avoidance are projected to net £6.5 billion a year by 2030. Changes to the welfare regime, including efforts to reduce fraud and error in the system are predicted to rake in about £4 billion in 2029-30. A 1-year extension in business rates for the retail, hospitality and leisure sector comes at a cost of £1.7 billion next year. The chancellor also increased air passenger duty from 2026 — raising £720 million a year by 2030, introduced a duty on vaping products, netting £15 million that year, altered tobacco duties including bringing in an escalator to ratchet the main level upwards, bringing in £180 million, and uprated a levy on soft drinks, raking in another £95 million.
--With assistance from Philip Aldrick, Andrew Atkinson and Irina Anghel.
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