Chancellor Rachel Reeves tells the BBC it's likely her tax-raising Budget may affect wage growth for workers, as businesses will have to absorb the costs of paying more National Insurance or give out smaller pay rises
Asked about the impact of increasing NI contributions for employers by 1.2% from April 2025, she says: "I said that it will have consequences"
The government says it will raise £25bn from the measure - but the Institute for Fiscal Studies think tank claims it will raise just £16bn, because businesses will scale back wage rises
In a visit to a hospital in the West Midlands alongside Reeves, PM Keir Starmer says NHS funding in the Budget is a "down payment" on the health service's future, but adds staff workload will "likely to go up, not down"
Key takeaways: Labour's first Budget in 14 years features tax rises worth £40bn to fund the NHS and other public services - read the main measures here
'Right thing' for businesses and wealthiest to pay more - Reeves
Reeves now announces she will be cutting duty on draft alcohol - to loud cheers from MPs.
"Which means a penny off the pints at the pubs," the chancellor says.
Alcohol duty rates on non-draught products will increase in line with RPI from February next year.
Reeves turns now to air passenger duty.
She says it has not kept up with inflation, so they are introducing an increase of no more than £2 for an economy-class short haul flight.
But on private jets, she is increasing the rate of air passenger duty by a further 50% - equivalent to £450 per passenger for a private jet, "to say, California?" she jokes, in an indirect reference to Sunak.
Reeves says Labour wants to support take-up of electric vehicles.
The Budget will maintain existing incentives for EVs in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025, she says.
The measure is forecast to raise about £400m by the end of the forecast period, she adds.
Reeves says the government will renew the tobacco duty escalator which means that taxes will rise by the Retail Price Index (RPI) measure of inflation as well as 2%.
In addition, she will increase duty by 10% on hand-rolled tobacco this year, introduce a flat-rate duty on all vaping liquid from 2026, and a one-off increase in tobacco duty to maintain the incentive for smokers to give up smoking.
Reeves says she will extend the inheritance tax threshold freeze for a further two years to 2030.
That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner, she says.
She says she will bring inherited pensions into inheritance tax from April 2027, she says, adding she will reform Agricultural Property Relief and Business Property Relief.
From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%, she says.
Jack Fenwick
Political reporter
The chancellor has scrapped a controversial arrangement that saw the government receive hundreds of millions of pounds from a pension scheme for mineworkers.
The government had been entitled to half the surplus cash from the scheme under an agreement signed 30 years ago.
It’s understood the change will see a total of around £1.5bn transferred into the pension pots of 112,000 former coalminers.
Announcing the news in today’s Budget, Rachel Reeves says it would mean “working people who powered our country receive the fair pension they are owed".
In May, the BBC revealed that more than £420m from the scheme had flowed into the government’s coffers in the previous three years.
Dearbail Jordan
Business reporter
As widely expected, the chancellor has lifted employers' National Insurance Contributions, but the drop in the threshold at which businesses start paying it is pretty startling - from £9,100 to £5,000.
It will raise £25bn, she says.
"I know that this is a difficult choice," Reeves adds. "I do not take this decision lightly".
However, businesses will have a lot to say about this.
Reeves tells the Commons that capital gains tax (CGT) will increase.
This tax is charged on profits which are made from selling assets such as a second home or investments, including shares.
The lower rate of Capital Gains Tax will rise from from 10% to 18%, and the higher rate from 20% to 24%, she says.
The rates on residential property will remain at 18% and 24%.
Reeves says she is increasing Employment Allowance to help smaller businesses.
The Employment Allowance will increase from £5,000 to £10,500, which the chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year.
She adds over one million will pay the same or less as they did previously.
Simon Jack
Business editor
The cost of government borrowing fell after the chancellor promised to balance the books early, with the OBR forecasting that the government would spend less than it gathers in tax by 2027.
Reeves announces that employers' National Insurance contributions will rise from 13.8% to 15%.
In addition, the threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000.
Reeves says she will not increase National Insurance, VAT and income tax for working people.
Reeves says increasing fuel duty next year would be the wrong choice for working people.
It would mean fuel duty rising by 7p per litre.
She says she will freeze fuel duty next year and will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year, she says.
Labour will make sure that "the people who powered our country receive the pension they are owed", Reeves says.
That will follow a government commitment to the triple lock. Spending on the state pension is projected to rise 4.1% in 2025-26 – that is a £470 increase for over 12 million pensioners in the UK, Reeves says.
Reeves now says her government will protect working people from unfair dismissal, safeguard them from bullying in the workplace, and improve their access to paternity and maternity leave.
Faisal Islam
Economics editor
Forty billion pounds of tax rises is simply huge, and is one of the very largest tax rising Budgets outside of a time of recession.
The chancellor sought to heap the blame for this on her “fictitious” public finances inheritance.
The mood music from her aides is very much that this is a “one off” designed to deal with that specific problem.
The question is how much of this really was a surprise, and whether they really will believe the chancellor will not return for more at a later date.
Reeves announces a new "Fair Repayment Rate" that will reduce the level of debt repayments that can be taken from a household’s Universal Credit payment each month, reducing it from 25% to 15% of their standard allowance.
Says this will help 1.2 million of the poorest households, who will be able to keep more of their award each month.
Dharshini David
Chief economics correspondent
At first sight, it appears that the OBR’s growth and inflation forecasts for the next couple of years are higher than most economists including the bank of England expect – i.e. this Budget significantly boosts both.
That may risk interest rates falling more slowly than currently forecast.
On the Carer's Allowance, Reeves says the amount that carers can earn and still receive the allowance will rise to the equivalent of 16 hours at the National Living Wage per week.
A carer can now earn over £10,000 a year whilst receiving the allowance, which will allow them to "keep more of their money", Reeves says.
Carer’s Allowance currently provides up to £81.90 per week to those with additional caring responsibilities.
Dearbail Jordan
Business reporter
Those forecasts by the OBR on economic growth are quite a change from what it predicted in the spring under the Tories.
It now says economy will grow by faster than expected this and next year. However, the UK economy will not expand as quickly as the OBR predicted for 2026, 2027 and 2028.
The chancellor has already said that a review of the spending figures presented by the Tories to the OBR for the spring Budget means forecasts would be "materially different" so perhaps it is hard to compare.
