Budget 2024 latest: Huge boost for Reeves as IMF growth forecast rises after inflation battle ‘largely won’

Inheritance tax is a levy on the estate of someone who has died. This is their property, money and possessions. Crucially, it is not paid if the value of these things is below £325,000.

The tax rate is 40 per cent, but it’s only charged on the part of the estate that’s above the threshold. In 2023/24, only 5 per cent of deaths generated an inheritance tax bill, raising around £7 billion.

However, the IFS writes that the tax measure “is littered with special exemptions”. These include a business relief, the ability to pass on agricultural land tax-free, and the tax-free passing on of pension pots.

The economic think tank says that ending these measures alone would raise £4.8bn a year by 2029.

Pension tax relief is a reduction of the amount of tax paid on private pensions. It helps workers save for retirement by boosting their pension pots.

The amount of tax relief a person is granted is based on their income tax. It will effectively cancel out tax on pension contributions up to a maximum of £60,000.

After this, contributions will be taxed at either 20, 40, or 45 per cent, depending on which income tax rate the worker falls into.

However, the chancellor is thought to be considering a flat 30 per cent pension tax relief rate. This would mean that higher earners would effectively pay 10 per cent in tax, while those on the additional rate would pay 15.

The measure would raise around £3 billion a year, with 7 million earners paying more tax. But it would be better news for basic rate earners, who would actually begin to receive a 10 per cent boost to their pension contributions.

Evaluating the idea last year, the IFS said it would “redistribute the burden of taxation from the bottom 80 per cent to the top 20 per cent of earners.”

The UK needs its own version of Israel’s Iron Dome missile defence system to protect it from Russian aggression, former ministers have said.

Former defence secretary Penny Mordaunt told The I: “This is a significant UK capability gap we must plug at the earliest opportunity. The forthcoming Budget must enable early work to be done on the alliance’s key needs and let the US and other partners know we mean business.”

Capital Gains Tax (CGT) is paid on the profit made when an asset which has increased in value is sold. It is applied to things like the sale of personal possessions worth more than £6,000 (apart from a car), property that’s not the seller’s main home, shares and business assets.

It is charged at 10 or 18 percent for basic rate taxpayers, and 20 or 24 for higher or additional rate earners. There is a tax-free allowance of £3,000.

There are several ways CGT could be changed. In the run-up to the election, the Lib Dems and Greens both said they would rethink the tax bands to be more similar to income tax, raising an estimated £5.2bn a year.

Speculation has mounted in the subsequent months, with an increase in employer NICs now looking likely. The measure has caused strong political debate, focused on whether it would break Labour’s manifesto pledge to not raise taxes on “working people.”

Ministers and Treasury officials have indicated the government’s position is that the measure would not break their manifesto pledge. Labour has not confirmed that an employer NIC hike will be included in the Budget, but has refused to rule the measure out.

Meanwhile, Institute for Fiscal Studies director Paul Johnson has argued it would be a “straightforward breach.”

The tax expert adds that in the extreme case that an increase of one pence per pound in employer NICs was passed on to employees in the form of lower wages, the measure would only net £4.5 billion a year. He adds that the end figure would probably be a little higher than this, but much less than a previous HMRC estimate of £8.5 billion.

Martin Lewis has issued a warning over a new crackdown on buy now, pay later products.

The money expert has cautioned consumers it is a case of buy now, get protected later.

Ministers have announced that millions of shoppers are to be protected by new rules for BNPL, as they are known.

Mr Lewis welcomed the change saying: "Buy Now, Pay Later is now ubiquitous at online checkouts, so the fact it’s never been regulated is a travesty I and others have long campaigned on.

“The last chancellor promised to regulate, then the tumbleweed rolled as he went silent, so I am delighted the new government has quickly restarted the process.”

Rachel Reeves should increase capital gains tax (CGT) at Labour’s upcoming Budget, a group of millionaire business owners have urged, estimating the measure would raise £14bn a year.

In a report by the IPPR think-tank, analysts have consulted with wealthy entrepreneurs who say higher CGT would not have stopped them from making investments in the UK.

The group has called for CGT to be aligned with income tax, arguing that fears such a move would lead wealthy individuals to leave the country in response are unfounded. Recent HMRC analysis found that a 10 per cent increase to the measure would actually cost the exchequer £2bn after behavioural impacts.

Wes Streeting has refused to rule out that the Government will freeze income tax thresholds in the upcoming Budget.

Mr Streeting had previously voted against the measure in opposition while Rishi Sunak was prime minister.

Speaking on Sunday Morning With Trevor Phillips on Sky News, Mr Streeting said: “I’m not going to speculate on what the Chancellor might do in the Budget.

“If you’re asking me whether I would vote against anything in the Chancellor’s Budget? The answer is no, of course I’m not going to do that.”

He went on to say: “This country is paying a heavy price for Conservative failure, and we’re going to have to make some big and difficult choices in this Budget to make sure we fix the foundations of the economy and we don’t end up back here.”

He later added: “What we’re not going to do is duck the difficult decisions, have Government by gimmick, short-term sticking plasters, because that is exactly how we ended up in this situation.”