At noon on October 30, 2024, local time in the UK, the focus of the whole country was on the first budget release after the Labour Party came to power.
British officials announce the biggest tax increase plan in 30 years.
At noon on October 30, 2024, local time in the UK, the focus of the whole country was on the first budget release after the Labour Party came to power. This Budget has launched an unprecedented tax increase measure, which plans to increase the income of the rich and enterprises by 40 billion pounds, making it the largest tax increase policy in modern British history since 1993. The main purpose of this tax increase is to fill the 21 billion deficit left by the Conservative government, and at the same time provide the necessary funds for public services.
Rachel Reeves, Chancellor of the Labor Party, declared at the press conference that this budget aims to reverse the decline of British public services in the past decade or so. She mentioned that the current income tax threshold will be frozen until 2028/29, and then it will be adjusted according to the inflation rate. The policy of the last Conservative government made the threshold frozen, which led to more and more people entering the higher tax rate range with the increase of wages.
The key contents of the budget include: raising the employer cost of private enterprises through tax increase, increasing various consumption taxes, raising the capital gains tax, and raising the stamp duty on the second house from 3% to 5%. Reeves stressed: "The only way to improve living standards and promote economic growth is to keep investing. There is no other shortcut. In order to achieve these investments, we must restore economic stability and bid farewell to the situation of the past 14 years. "
In addition, one of the core measures of the budget is to increase the national insurance contributions paid by employers. According to the new policy, enterprises will start to pay national insurance when their employees' income reaches 5,000 pounds, while the previous threshold was 9,100 pounds. At the same time, the employer's tax rate will also increase by 1.2 percentage points to 15%. Reeves said that these measures will provide necessary support and funds for economic recovery.
The specific contents of the British New Deal are as follows:
(A) tax adjustment
1. Cancel the tax status of "non-British domicile": From April 6, 2025, the British government will cancel the tax status of "non-dom" and create a residence-based tax system to attract outstanding talents and investment.
2. Freeze some tax rates of working class: promise not to raise the basic, higher and additional tax rates of personal income tax, national insurance or value-added tax of working class. Starting from April 2028, the threshold of personal income tax and national insurance will be raised according to the inflation rate.
3. Adjustment of inheritance tax: the threshold of inheritance tax will be frozen and extended for another two years until 2030, and unused pensions will be taxed from 2027.
4. Increase the employer's national insurance payment ratio and lower the payment threshold: From April 2025, the employer's national insurance payment ratio will be increased from 13.8% to 15%, and the income threshold for paying national insurance for employees will be reduced from 9,100 to 5,000.
5. E-cigarette tax for the first time: From October 1, 2026, the e-cigarette tax of 2.2 pounds/10ml will be levied, and the tobacco tax will be increased by 10% at the same time.
6. Collecting value-added tax from private schools: From January 1, 2025, 20% value-added tax will be collected from private schools, which is applicable to all education, training and boarding services provided by private schools. It is estimated that by 2029-30, more than 1.7 billion pounds will be raised every year, and it is estimated that 90 million pounds will be raised every year if private schools are exempted from the charity rate.
(B) the field of transportation
1. Railway fare increase: The railway fare will increase by 4.6% in March next year, and the upper limit of one-way bus fare in England will be raised to 3 pounds from January (except London and greater manchester). Except for the most efficient new gasoline vehicles, the vehicle consumption tax paid by all car owners will double in the first year to encourage the switch to electric vehicles.
(C) Wages and investment in education
1. Raise the minimum wage: The minimum wage in the UK has increased by 6.7% to 12.21 pounds per hour, and the minimum wage for employees aged 18-20 has increased by 16.3% to 10 pounds per hour.
2. Investment in education: 6.7 billion pounds will be invested in the British Ministry of Education, of which 1.4 billion pounds will be used to rebuild more than 500 schools, and the budget of core schools will be increased by 2.3 billion pounds. In 2025-26, the investment in free breakfast clubs will be tripled, and 1 billion pounds will be invested in children with special educational needs.
Former British Prime Minister Sunak retorted in Parliament that the promises in the Labour Party's budget had not been fulfilled, the fiscal rules had been tampered with, the borrowing had increased by billions of pounds, and the scale of taxation, borrowing and expenditure was much larger than that announced during the election period. Opposition lawmakers and business leaders accuse the government of hitting employers hard, which may lead to unemployment and pay cuts. Ordinary people in Britain have a complicated attitude towards the new budget. Some retired people want the rich to pay more taxes, and some parents worry that it will be difficult for private schools to afford the expenses after the VAT increase.
Rising tuition fees in well-known private schools
With the British government planning to levy 20% value-added tax (VAT) on private schools, many well-known private schools have started to raise tuition fees. The following are the tuition increases of some top private schools:
1. Eton College (Eton College)
Current cost: 52,749 per year.
From January 2025: 63,000 pounds per year.
Increase: 20%
Eton College announced that it would pass on the full value-added tax to parents, resulting in the tuition fees of most students rising by more than 10,000 pounds every year. Students with full grants will not be affected, and students with partial grants will receive corresponding discounts.
2、Harrow School
Current cost: 53,550.
From January 2025: 64,260.
Increase: 20%
Harrow School said that from January, tuition fees will be subject to the current VAT rate, and the full value-added tax may be passed on, with an increase of 10,710 pounds.
3、Winchester College
Current expenses: 51,855 for boarding and 38,367 for day study.
Fees from January 2025: 57,040.50 for boarding and 42,203.70 for day study.
Increase: 10%
Winchester College said that the cost of non-grant families will increase by 10%, the boarding fee will increase by more than 5,000 pounds a year, and the day school fee will increase by nearly 4,000 pounds.
4、St Paul’s School
Current expenses: 31,170 for day study and 46,908 for boarding.
Fees from January 2025: 33,975 for day study and 51,129 for boarding.
Increase: 9%
Sao Paulo Public School raised the tuition fee by 9%, and the principal said that the school would try its best to keep the tuition fee affordable.
5、Dulwich College
Current cost: 26,421.
Cost from January 2025: 29,217.
Increase: 10.6%
Dewei College raised the fees for students in grades 9 to 13 by 10.6% and for students in grades 3 to 8 by 10.1%.
6、Bedales School
Current expenses: 46,185 for boarding and 35,775 for day study.
Fees from January 2025: 52,927.29 for boarding and 42,608.02 for day study.
Increase: 14.5%
Bedales school plans to increase the cost by 14.5%, without passing on the full value-added tax, in order to reduce the burden on families.
7. Millfield School (Millfield School)
Current expenses: 49,680 for boarding and 32,340 for day study.
Fees from January 2025: 57,132 for boarding and 37,191 for day study.
Increase: 15%
Milfield School increased tuition by 15%, the annual fee for boarders increased by nearly 7,500 pounds, and that for day students increased by nearly 5,000 pounds.
8、Lancing College
Current semester fee: 12,094 for day study and 16,738 for boarding.
Fees from January 2025: 53,319 for day study and 36,441 for boarding.
Increase: 14%
Blue Star College said that tuition fees will increase by 14%, but it has not passed on the full value-added tax, and plans to adjust some costs according to the situation of each country.
The increase in tuition fees in these private schools reflects the impact of the value-added tax policy on the cost of education, and many parents are facing higher economic pressure. Although some schools have promised to absorb part of the value-added tax, a significant increase in overall tuition fees is still inevitable.