National insurance, income tax and alcohol duty: What taxes did Reeves change in her Budget?

ITV News Deputy Political Editor Anushka Asthana talks us through the Chancellor's announcements and the scale of tax changes to come

In a pivotal moment for the UK economy, Chancellor Rachel Reeves has unveiled a series of bold tax measures aiming to keep borrowing under control and prevent a return to austerity.

Among the headline aspects of Wednesday's Budget was a hike in how much employers will pay in national insurance contributions - up by 1.2 percentage points to 15%.

The tax rises announced by Reeves appeared targeted generally at wealth, rather than income. Increases in capital gains tax and changes to inheritance tax and stamp duty were also key features of her speech.

Addressing Parliament, Reeves promised not to increase the headline taxes on the pay cheques of “working people”: national insurance, VAT and income tax.

After entering office in July, the government said it needed to fill a £22 billion “black hole” in the public finances.

Reeves is said to have since identified a far larger £40 billion funding gap which she will seek to plug to protect key departments from real-terms cuts and put the economy on a firmer footing.

But last week the Institute for Fiscal Studies warned that up to £25 billion in tax rises would be needed to fulfill Reeves' promise of "no return to austerity".

Here, ITV News explains what tax measures were laid out in Wednesday's Budget.

Employer National Insurance

Reeves has announced a substantial increase in Employer National Insurance Contributions, raising the rate of Employers' National Insurance by 1.2% to 15% from April 2025.

The Secondary Threshold, the amount an employee has to earn before an employer has to start paying national insurance on each salary, is set to be reduced from £9100 per year, to £5000.

Employers currently pay 13.8% on earnings above £175 a week, or £9100 a year per person, under Class 1 NI contributions. It's deducted and set aside for HMRC before wages are paid out.

Reeves said: "I do not take this decision lightly. We are asking business to contribute more."

However, the chancellor did put forward an exception for small businesses, increasing the Employment Allowance, an initiative which allows eligible employers to reduce their National Insurance liability. Employment Allowance will now go up from £5000 to £10,500.

Since the election, speculation has swirled around employer National Insurance contributions being increased.

The key question was whether this breaks Labour's manifesto promise not to raise taxes for "working people".

The PM has suggested it does not, but business groups say an increase in employer NI would be a "clear manifesto breach", placing "an additional strain on businesses".

They argue a rise will impact working people as employers could restrict new hires, limit pay rises, scale back pension payments or even put up prices for customers.

Income tax thresholds

Reeves has said she will not extend the freeze on income tax thresholds, which are the income levels at which people start paying NI or income tax.

These used to rise every year in line with inflation but, the NI threshold and tax-free personal allowance are currently frozen at £12,570 until 2028.

Reeves announced on Wednesday that from the year 2028 to 2029, personal tax thresholds will be once again uprated in line with inflation once again.

“Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips," the chancellor said.

Capital gains tax

Capital gains tax is paid by around 350,000 people, which is less than 1% of the population.

It's the tax levied on any profit when someone sells an asset worth more than £6,000 - like a second home, or shares.

The CGT rate is 10% for profits above £3,000, or 18% on profits from selling a residential property other than a main home.

The higher rate of CGT is 24% on residential property and 20% on all other chargeable assets.

In her Budget, the chancellor has increased the lower rate of capital gains tax from 10% to 18%, and the higher rate from 20% to 24%.

The rates of capital gains tax on homes and other residential properties will be maintained at 18% and 24%.

Corporation tax

Corporation tax is paid by UK companies on the annual profits a company makes - the current main rate is 25%.

Reeves confirmed she will cap corporation tax at 25% for the rest of the parliament, the lowest rate of the G7 countries.

Inheritance tax

Inheritance tax is paid on someone's estate when they die - it includes their property and other assets, but not if the value is below £325,000.

It's currently taxed at 40%, but only on the part of the estate above the threshold.

The number of people who pay inheritance tax is very small - last year only 5% of estates were charged an inheritance tax bill, and there are also quite a lot of exemptions.

In her Budget, Reeves announced she would extend the freeze on inheritance tax thresholds introduced under the previous governments, from 2028 for two further years, until 2030.

This means the first £325,000 of any estate can still be inherited tax-free, increasing to £500,000 if the estate includes a residence passed on to direct descendants.

On inheritance taxes applied to farms, the chancellor announced agricultural property relief and business property relief will be reformed.

She said that from April 2026, there would continue to be no inheritance tax on the first £1 million of combined business and agricultural assets. However, for assets over £1 million, inheritance tax will apply with 50% relief, at an effective rate of 20%.

Fuel duty

Fuel duty on standard petrol and diesel is currently 52.95p per litre, after the Conservatives cut it by 5p in 2022. It's expected to raise £24.7 billion in 2023-2024 according for the Office for Budget Responsibility.

On Wednesday, Reeves announced she will freeze fuel duty next year, also maintaining the Tories' 5p cut for another year.

"There will be no higher taxes at the petrol pumps next year," she said.

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Alcohol duty

Earlier this year, the Conservative government froze the rates of alcohol duty, a measure which was due to stay in place until February 2025.

Reeves said rather than uprating products alcoholic drinks sold on draught in line with inflation, she will cut draught duty by 1.7%.

This would amount to "a penny off a pint in the pub", the chancellor added.

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