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Today, Chancellor Rachel Reeves delivered Labour’s first budget in more than a decade. The speech features £40bn in tax hikes, an increase in employer National Insurance contributions, and the confirmation of VAT on Private Schools.

What does the £40bn in Tax Hike mean for your finances?

The Chancellor has raised the basic Capital Gains rate from 10% to 18% and the higher rate from 20% to 24%. This move will bring about significant consequences for investors as people holding shares are less incentivised to sell them. As a result, there is reduced economic activity across the economy.

Rachael Griffin, a tax expert at Quilter believes that this move could undermine the government’s objective to raise additional revenue as reduced spending means less CPT is collected. This will also prompt a greater shift of investments in ISAs, which have a higher tax efficiency.

While Labour has not increased employee National Insurance, the rate of employer NI has been increased to 15%. This move means that almost 900 000 employees will not have to pay NI next year. However, these higher costs could deter employment and increases in wages.

How are state pensions and pension credits affected?

Reeves has confirmed a 4.1% boost on basic and new state pensions to satisfy the average earnings pillar of the triple lock. The triple lock ensures that state pensions will rise by at least 2.5% every April.

This will reflect an increase of £465 in the single pensioner guarantee next year. However, winter fuel payments will not be provided to those that do not recieve the Pension Credit.

How will VAT on Private Schools affect families?

The VAT exemption on Private Schools will be lifted on the first on Janurary with the Finance Bill. Keir Starmer has promised to use revenues raised to recruit new teachers for state schools.

Saltus, a wealth management firm, has found that one in eight families will move their kids to state schools following the increase in tuition costs. This is just the tip of the iceberg; many smaller private schools will be at risk of closure.

Data from the Independent Schools Council shows that the average costs pupils at a private school is £24 000 and £42 500 for day pupils and boarders respectively. It would be difficult for families to obtain the additional amount from their post-tax income.