Rachel Reeves to hammer families in Budget by ‘cutting inheritance tax and stamp duty relief’ while upping fuel duty to help fill Treasury coffers (and vaping will cost more too)_Nhy
Middle class families appear to be facing a Budget pummelling from Rachel Reeves as she looks to end tax breaks in a scramble for cash.
The Chancellor will reportedly end a temporary increase to the stamp duty threshold, landing buyers with a £2,500 bill that will add £1.8billion to Treasury coffers.
At the same time the BBC reported that Ms Reeves has her eye set on removing or tightening some exemptions and reliefs to inheritance tax, which currently brings in £7billion a year.
And fuel duty is set to rise by up to 7p a litre, with Whitehall sources saying the Chancellor will not renew a ‘temporary’ 5p cut due to end in March next year after 14 years.
In what looks like to be a testing Budget for Brits across the board, she is also understood to be seeking to make around £3 billion of cuts to welfare over the next four years by restricting access to sickness benefits.
The Chancellor is expected to commit to the previous Tory government’s plans to save the sum by reforming work capability rules, as first reported by The Telegraph.
Even vaping is set to become more expensive, with ministers seeking to reduce the rate of children using the addictive tobacco inhalers by increasing tax.
NHS figures cited by the Guardian show around a quarter of children aged 11 to 15 have used them.
The Chancellor will reportedly end a temporary increase to the stamp duty threshold, landing buyers with a £2,500 bill that will add £1.8billion to Treasury coffers
The Chancellor is preparing to unveil an eye-watering £40billion of tax hikes and spending cuts on October 30.
Tax is likely to make up the overwhelming bulk of the package – meaning it could exceed the £31.3billion brought in by Rishi Sunak‘s post-Covid Budget in Spring 2021.
Bringing the stamp duty threshold down would see it return to £125,000 from £250,000 for most buyers and to £300,000 from £450,000 for first-time buyers, the Times reported.
But property guru Kirstie Allsopp told Times Radio that stamp duty is ‘a monster’ and expected changes to thresholds in the Budget have caused ‘chaos’ in the housing market and ‘won’t claw back any money’.
She said: ‘It’s become so complicated that I can no longer tell anyone what they would be paying in stamp duty. I have to go onto the stamp duty calculator and calculate it with the government calculator per property and I have to put in all the different circumstances…Stamp duty has become a monster.’
‘It won’t claw back any money…Stamp duty is a dead tax.’
Ms Reeves is also considering restoring the annual fuel duty rise, which would add another 1p or 2p to the duty levied at the pumps, with VAT adding another penny to the price paid by motorists.
A 7p rise in fuel duty would add £3.85 to the cost of filling up an average family car – undermining Labour‘s claim that it will not impose higher taxes on working people.
But ministers believe that, with pump prices at their lowest since Russia’s invasion of Ukraine, they can justify a fresh tax raid. Fuel duty is currently 52.95p per litre.
Insiders say the Treasury has modelled raising fuel duty by as much as 15p a litre. However, Ms Reeves is expected to back away from an increase on this scale amid fears of a backlash from motorists and business.
The Treasury pencils in an inflation-level rise in fuel duty each year. But protests by Tory MPs saw successive Conservative chancellors block it every year.
A Whitehall source said: ‘Ms Reeves’ officials are telling her it’s now or never on fuel duty. The Treasury always hated the fuel duty freeze and is determined to get rid of it.
‘They are advising her that motorists can afford it and that if she doesn’t act to end the freeze now she will find it much harder to do so later in the parliament.’
Economist Adam Corlett, from the Resolution Foundation think-tank, said: ‘Fuel duty is set to rise by around 6p a litre next spring due to inflation and a temporary cut expiring.
‘Cancelling this and future annual increases would cost £5billion a year by the end of the parliament – money the Chancellor simply doesn’t have as she tries to plug a £40billion funding hole for our schools, hospitals and other public services.’ Howard Cox, of campaign group FairFuel UK, said: ‘UK’s 37million drivers are set to be punished hard.’
Although the Treasury has modelled a 15p increase in fuel duty, Ms Reeves is set to back a less stark rise (file photo)
A Treasury spokesman said: ‘We do not comment on speculation around tax changes outside of fiscal events.’
Meanwhile, in the Lords, government minister Baroness Blake ducked questions about whether the Treasury is drawing up plans to introduce road pricing to fill a projected shortfall in revenue as people switch to electric vehicles.
Tory peers warned that any move to introduce per-mile pricing would slow the take-up of electric vehicles.
She said: ‘I cannot comment on any matter that might be raised in the Budget.’
The Chancellor is also expected to honour the previous Tory government’s plans to make around £3 billion of cuts to welfare by reforming work capability rules.
Work and pensions minister Alison McGovern did not steer away from the reports when asked about them by broadcasters, but said Labour was making its ‘own reforms’ to the benefit system.
As part of the reported welfare cut proposals, it is understood Ms Reeves will commit to the plan to save £3 billion over four years, but Work and Pensions Secretary Liz Kendall will decide how the system will be changed in order to achieve this.
Ms McGovern, a minister in the Department for Work and Pensions, suggested Labour was making its own reforms rather than sticking to previous Tory commitments.
She told Times Radio: ‘We will not go ahead with the Tory plan because that was theirs. We will need to make savings like all departments, but we will bring forward our own reforms.’
Ahead of what is expected to be a Budget full of change, Sir Keir Starmer has faced a Cabinet backlash, with several ministers writing to the Prime Minister directly to express concern about proposals to reduce their departmental spending by as much as 20 per cent.
