Sixteen key highlights from Rachel Reeves' Budget 2024 including wage rise and new vape tax

Rachel Reeves has announced a series of changes to tax and spending in her first Budget as chancellor.

The chancellor laid out how she would raise £40 billion a year in extra taxes during her speech to MPs in the House of Commons on Wednesday afternoon.

Ms Reeves said the measures were necessary to address the “black hole” in the public finances left by the Tories while pumping billions into schools and hospitals.

READ MORE: Chancellor announces HUGE pay increase for Britain's youngest low-paid workers

READ MORE: ‘At last, a proper government’: Readers react to Budget 2024, but some aren't happy

Announcements included a 6.7 per cent hike to the minimum wage and a 4.1 per cent increase for people on state pensions.

Ms Reeves also committed to freezing fuel duty for an extra year and announced a new tax of vaping set to come into force in 2026.

The chancellor maintained her promise not to hike taxes for working people, but confirmed plans to hike employers’ national insurance contributions and increase capital gains tax. Changes to inheritance tax were also laid out in the Budget.

Here are 16 key highlights from Ms Reeves' first Budget under the new Labour government and what impact they may have on your financed.

Minimum wage increase

The National Living Wage for people ages 21 and over will rise by 6.7 per cent to £12.21 an hour next April, Ms Reeves announced. The increase, recommended by the Low Pay Commission, will mean an extra £1,400 a year for a full-time worker.

Ms Reeves said the government is moving towards "a single adult rate" which will be phased in over time and announced a significant increase to the minimum wage for younger workers.

The minimum wage for 18 to 20 year olds will rise by £1.40 to £10 an hour - an increase of 16.3 per cent, while the rate for 16 and 17 year old will rise by 18 per cent, to £7.55.

She said the minimum wage increase was "a Labour policy to protect working people being delivered by a Labour government".

Income tax thresholds frozen until 2028

One income tax thresholds, Mr Reeves vowed to end the freeze in 2028, instead of 2030 as originally planned by the Tories.

She said extending the threshold for those further two years would raise billions of pounds but would "hurt working people" and take more money out of payslips.

Ms Reeves announced: "I am keeping every single promise on tax that I made in our manifesto. So there will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government.

"From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this government chooses to protect working people every single time."

Fuel duty frozen again

The chancellor committed to freezing fuel duty and maintaining the 5p cut for another year, meaning drivers won't have to pay more at the pumps. The Tories' 5p fuel duty cut was due to end in March 2025, but Labour has committed to not raising the duty next year.

Ms Reeves said it was a "substantial commitment" to make to retain the 5p cut and freeze fuel duty again, costing more than £3 billion, but raising fuel duty would be the "wrong choice" for working people.

She told the Commons: "I have concluded that in these difficult circumstances while the cost of living remains high and with a backdrop of global uncertainty increasing fuel duty next year would be the wrong choice for working people.

"It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year."

New tax on vaping

Ms Reeves said she will introduce a flat-rate duty on all vaping liquid from October 2026.

She said there would be "an additional one-off increase in tobacco duty to maintain the incentive to give up smoking".

Increase to air fares

Ms Reeves announced an increase to Air Passenger Duty, which is paid on air fares. She said the duty had not kept up with inflation in recent years so an adjustment was needed.

The increase will add "no more than £2 for an economy class short-haul flight", she said, but private jets would be hit harder.

"I am taking a different approach when it comes to private jets," she said, "increasing the rate of air passenger duty by a further 50 per cent." In an apparent dig at Rishi Sunak, she added: "That is equivalent to £450 per passenger for a private jet to, say, California?"

Price of a pint to drop

Ms Reeves announced that the price of wine and spirits is set to rise, but pints in pubs will cost a penny less.

Alcohol duty rates on non-draught products will increase in line with RPI from February next year, Ms Reeves said, while duty on draught products will be cut by 1.7 per cent,

She said this would mean "a penny off a pint in the pub".

Benefits and state pensions to increase

The chancellor confirmed that benefits will be uprated in line with CPI at 1.7 per cent from next April.

State pensions will rise by 4.1 per cent, in line with earnings growth, under the triple lock guarantee.

Ms Reeves said: "While working-age benefits will be uprated in line with CPI at 1.7 per cent, the basic and new state pension will be uprated by 4.1 oer cent in 2025-26. This means that over 12 million pensioners will gain up to £470 next year."

Major National Insurance hike for employers

The chancellor announced that National Insurance contributions for employers will rise by 1.2 percentage points to 15 per cent from April 2025.

Ms Reeves said she would also be reducing the secondary threshold – the level at which employers start paying national insurance on each employee’s salary – from £9,100 per year to £5,000.

Speculation that the chancellor was planning the move had been widely reported in recent days, with many businesses raising concerns about how much the tax hike would add to their staff costs.

The changes will raise £25 billion per year by the end of the forecast period, Ms Reeves said.

She explained: "I know that this is a difficult choice. I do not take this decision lightly. We are asking business to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today. But in the circumstances that I have inherited, it is the right choice to make."

Ms Reeves also announced an increase from £5,000 to £10,500 to the Employment Allowance for small businesses, which allows eligible employers to reduce their national insurance liability.

"This means 865,000 employers won’t pay any national insurance at all next year, and over one million will pay the same or less as they did previously," she said. "This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages."

Non-dom tax status to be abolished

Ms Reeves confirmed that the government would abolish the non-dom tax regime from April next year.

"I you make Britain your home, you should pay your tax here," she told MPs. "So today, I can confirm, we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025."

Capital Gains Tax increase

Ms Reeves announced that the rate of Capital Gains Tax (CGT), which is paid on profit made by selling on assets such as shares and residential properties, will increase.

She said the lower rate of CGT will rise from 10 per cent to 18 per cent and the higher rate will rise from 20 per cent to 24 per cent. The rate of CGT on residential property will remain at 18 and 24 per cent, she added.

Ms Reeves said despite the increase, the UK will still have the lowest CGT rate of any European G7 economy.

She said the relief for people selling their businesses will be held at 10 per cent this year, rising to 14 per cent in 2025 and 18 per cent in 2026.

The move will bring in £2.5 billion in tax receipts by the end of the forecast period, she said.

Changes to inheritance tax

The chancellor plans to raise around £2 billion through changes to inheritance tax, which is paid on the estate of someone who has died. Ms Reeves said only 6 per cent of estates will pay inheritance tax this year.

"I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today," she told MPs.

She said: "The previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 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 £1 million when a tax-free allowance is passed to a surviving spouse or civil partner."

On inheritance taxes applied to farms, she said: "We will reform agricultural property relief and business property relief. From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with 50 per cent relief, at an effective rate of 20 per cent."

Compensation for victims of the infected blood and Post Office scandals

The chancellor announced £11.8 billion will be set aside for compensation for the victims of the infected blood scandal. Another £1.8 billion will be set aside for victims of the Post Office scandal, she said.

Ms Reeves accused the previous government of failing "to budget for costs which they knew would materialise" for the two "terrible injustice".

She told MPs: "The Leader of the Opposition rightly made an unequivocal apology for the injustice of the infected blood scandal on behalf of the British state, but he did not budget for the costs of compensation.

"Today, for the very first time, we will provide specific funding to compensate those infected and those affected, in full with £11.8 billion in this Budget. I am also today setting aside £1.8 billion to compensate victims of the Post Office Horizon scandal, redress that is long overdue for the pain and injustice that they have suffered."

Tackling benefit fraud and reforming welfare system

Ms Reeves announced a series of welfare reforms including a crackdown on benefit fraud that will see the DWP given direct access to claimants' bank accounts to recover debts.

She said work and pensions secretary Liz Kendall will also bring forward plans to reform work capability assessments.

A white paper entitled 'Get Britain Working' will be published soon outlining plans to tackle "the root causes of inactivity", she said, and £240 million will be allocated to fund new projects aimed at "those who are economically inactive and most at risk of being out of education, employment or training".

She said these plans will "get people into work and reduce the benefits bill".

Tax evasion crackdown

Ms Reeves said HMRC will crack down on unpaid taxes to raise an extra £6.5 billion and "ensure that people pay what they already owe".

"We will invest to modernise HMRC’s systems using the very best technology and recruit additional HMRC compliance and debt staff," she told the Commons. "We will clamp down on those umbrella companies who exploit workers, increase the interest rate on unpaid tax debt to ensure people pay on time, and go after promoters of tax avoidance schemes."

Carers Allowance claimants to benefit from higher earnings threshold

Ms Reeves announced that people who claim Carers Allowance - a DWP weekly benefit that currently provides up to £81.90 to carers who provide 35 hours of care a week - will be able to earn more money before having their benefit cut.

She said the government would increase the weekly earnings limit to the equivalent of 16 hours a week at minimum wage. Currently, the earnings limit is £151 a week.

She described this as "the largest increase since Carer’s Allowance was introduced in 1976" and told MPs: "That means a carer can now earn over £10,000 a year while receiving Carer’s Allowance, allowing them to increase their hours where they want to and keep more of their money."

She added that she was concerned about the "cliff edge" approach to the earnings limit and the DWP was looking into the issue of overpayments to find the "right solutions".

Funding for free breakfast clubs tripled

Breakfast club funding will be tripled to fund clubs in thousands of schools, Ms Reeves announced.

She added: "I am increasing the core schools’ budget by £2.3 billion next year to support our pledge to hire thousands more teachers into key subjects. So our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education."