The UK Chancellor has just announced a record £40 billion in tax rises, in one of the most significant Budgets in recent times. These are the key points for people living in Northern Ireland:
Stormont budget
Devolution means many of the spending commitments announced by Rachel Reeves on the likes of health, education and transport don’t apply in Northern Ireland. Instead, the Northern Ireland Executive gets a flat sum, calculated using the Barnett formula. For the coming 2025-26 that sum will amount to £1.5 billion, which is understood to be considerably more than the Finance Minister had been expecting.
It takes the Executive’s 2025-26 budget to £18.2bn. The extra £1.5bn includes £1.2bn for the day-to-day running of Stormont’s departments, i.e. things like wages and funding programmes. Another £270m will be allocated for capital projects, taking the total available for infrastructure to £2.2bn.
- ‘Austerity was never going to be reversed in one budget’ – finance minister warns Stormont faces £129m funding shortfall this yearOpens in new window
- Budget: What business groups in the north are sayingOpens in new window
- ‘Painful’ Budget from a government not afraid to be unpopularOpens in new window
City and growth deals
One of the biggest outcomes from Wednesday’s Budget is confirmation that London will release funding for city and growth deals in Mid South West and Causeway Coast & Glens. It’ll amount to £162m over 15 years for both regions, with Stormont contributing the rest (£324m) in total.
Additional funding
Outside the budget allocation for Stormont:
- £730,000 is being allocated “to support schools as they work towards integrated status”.
- £38m for the PSNI’s Additional Security Fund.
- £8m for the Executive’s programme on paramilitarism and organised crime.
- An extra £10m for the NIO budget, increasing from £52m to £62.3m (this includes funding for the Omagh Bombing inquiry and the inquiry into the killing of Pat Finucane).
Minimum wage
The UK’s national minimum wage for workers aged 21+ is set to increase by 6.7% from April 2025, rising from £11.44 an hour to £12.21 an hour. The rate for those aged 18-20 will rise by 16.3%, taking it to £10 an hour.
The Treasury say this will affect an estimated 100,000 minimum wage workers in the north will be benefited to the tune on average, (for a full-time equivalent worker), of £1,400 per year.
Fuel duty
Despite stating that the retention of the freeze on fuel duty will cost the government £3bn this year, Rachel Reeves says she will keep it in place for another year. According to the Treasury, the temporary 5p cut in fuel duty benefits an estimated 1.3 million people in Northern Ireland, with a the average car driver saving £58 per year.
Employers’ National Insurance
While Labour claim they have honoured their commitment not to increase National Insurance, income tax or VAT on working people, they have asked businesses and the wealthiest to pay more. Employers National Insurance will increase by 1.2 percentage points to 15% from April 2025. The threshold employers start paying will be lowered from £9,100 to £5,000. The Chancellor said this will raise around £25bn per year.
But, the Chancellor is increasing the employers allowance from £5,000 to £10,500. The Treasury say this will mean more than 50% of businesses, including small and growing businesses, will either pay the same, or no employer National Insurance contributions.
Alcohol, tobacco and vapes
Alcohol duty rates on non-draught products will increase in line with the RPI (retail price index) from February next year. But duty on draught alcohol is cut by 1.7%, which Rachel Reeves will mean 1p off a pint.
Tobacco duty is set to increase as expected in line with the RPI measure of inflation, plus 2%. Duty on hand-rolled tobacco will increase by 10%.
From Oct 1 2026, the government will introduce a vaping duty for the first time at £2.20 per 10ml of liquid.
Income tax bands
The Chancellor announced there will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government. It means the freeze on income tax bands will continue for another few years. The freeze on tax thresholds is often labelled as a ‘stealth tax’, because moving people are moving into higher tax bands as their wages are increased in line with inflation.
But, from 2028-29, personal tax thresholds will be uprated in line with inflation once again.
Capital Gains Tax increases
Capital Gains Tax (CGT) is going up. The changes to the tax, which is charged on profit, will see the lower rate of CGT rate increase from 10% to 18%, while the higher rate will rise from 20% to 24%.
The rates on residential property will remain at 18% and 24%.
Inheritance tax threshold freeze extended
The freeze on the threshold for inheritance tax will remain until 2030. In practice, it will mean the first £325,000 of any estate can be inherited tax-free. That rises to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.
The Chancellor said she bring inherited pensions into inheritance tax from April 2027, adding she will reform Agricultural Property Relief and Business Property Relief. She announced that, while there would continue to be no inheritance tax due on combined business and agricultural assets worth less than £1m, above that there would be a 50% relief, at an effective rate of 20%, from April 2026.
Farming lobby groups have heavily criticised the plans, arguing it will hit the ability of the next generation of farmers.
Pensions
Chancellor Rachel Reeves reiterated the UK Government’s commitment to the pension triple lock: “This commitment means that while working-age benefits will be uprated in line with CPI at 1.7%, the basic and new state pension will be uprated by 4.1% in 2025-26.
“This means that over 12 million pensioners will gain up to £470 next year.”
She added: “The pension credit standard minimum guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner.”
