The run-up to the Budget typically sees speculation about what might be in it, which the government is trying to keep to a minimum this year.
Healey and Prime Minister Andy Burnham face a difficult balancing act, trying to offer more support to households and meet commitments on defence spending, while also sticking to Labour’s manifesto commitments on tax and the government’s self-imposed fiscal rules.
The previous chancellor, Rachel Reeves, set out two main rules, which the new leadership has vowed to follow. These are:
In March, the OBR calculated that the first rule would be met with a gap – or headroom – of £23.6bn. However, this headroom is expected to have shrunk.
Analysts at KPMG believe it could have fallen to £12bn, mainly due to the rise in government borrowing costs this year.
However, one option that has been floated is Healey potentially accepting a smaller buffer, reducing the need to increase taxes in the Budget.
Your First Home scheme
Further details on the “Your First Home” scheme, aimed at helping first-time buyers in England to purchase a property, are expected to be announced in the Budget.
The scheme will allow people to buy a new-build home with a deposit of 2.5%. It would provide them with a loan worth 20% of their property’s value to help pay for the purchase.
Capital Gains Tax
There has been speculation that Capital Gains Tax – which is imposed on the profit people make when they sell an asset that has increased in value – could be changed, through either higher rates or by removing or amending exemptions.
Mansion Tax
The High Value Council Tax Surcharge – dubbed the Mansion Tax – was announced in last year’s Budget and will apply to properties in England valued above £2m from April 2028. However, reports have suggested the government is considering extending it to properties worth more than £1.5m.
Taxes on banks
Banks have been reporting bumper profits, leading to calls from unions to increase taxes on the sector. But banks have pushed back, suggesting heavier levies would undermine the government’s aim to boost growth and make the UK less competitive.
