The run-up to the Budget typically generates 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 are divided on how much it may have fallen by. While a rise in government borrowing costs will increase debt interest payments, higher inflation could push up tax revenues.
KPMG believes the government’s buffer could have fallen to £12bn, but the Institute for Fiscal Studies estimates it could be £20bn.
There has been speculation over what specific measures will be announced in the Budget.
Bank taxes
Bank bosses have told the they expect Healey to raise taxes on the sector. UK banks have been reporting bumper profits, leading to calls from unions for higher taxes.
The Treasury has options: it could raise a 3% surcharge on profits which was lowered from 8% under the previous Conservative government, or it could raise the bank levy that is based on the size of their balance sheets.
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.
There were concerns raised that the threshold for eligibility for first-time buyers could be set at £90,000 for a combined income outside London, and £110,000 in the capital, which could have excluded couples such as teachers and nurses, or police officers.
But that threshold is will now be £110,000 outside of London, and £140,000 in the capital, the understands.
Capital Gains Tax
There had been speculation that Capital Gains Tax (CGT) – 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. However, this has now been ruled out.
Support for pensioners
Pensioners on low-incomes are expected to be shielded from income tax through a new personal allowance. The government had already committed to not taxing people who only get an income from the state pension, which is set to rise above the current £12,570 threshold.
Tax on businesses
The Times has reported, external that online retail giants such as Amazon and eBay are expected to be made responsible for collecting tax owed by traders using their platforms.
The paper said the money raised is expected to be used by the government to cut business rates for High Street shops, by raising the threshold at which small companies start paying rates from £12,000 to £18,000.
He is also planning support for small breweries.
Fuel duty
Fuel duty was frozen under the Conservatives in March 2022 and Sir Keir Starmer’s government continued the freeze, deciding in May to push back a planned 3p increase in September until the end of this year.
Healey told the in late September that the time and place for dealing with rising petrol and diesel costs was the Budget, but would not give details on whether the freeze would be extended again.
Energy bills
Household energy bills are set to see their biggest rise in four years in January, with a typical annual bill forecast to jump by £276.
There has been speculation, external that Healey is planning energy bill help for households on certain benefits.
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.
There had been speculation that the government was considering extending it to properties worth more than £1.5m. However, reports now suggest, external Healey has ruled this out.
Cutting red tape
Healey has said the government plans to slash “form-filling and pointless paperwork” to save UK businesses up to £800m.
Ministers have said the proposed changes in regulations will reduce unnecessary bureaucracy for businesses.
Social and affordable housing
Healey is expected to add another £1bn to the £39bn planned spend on social and affordable housing in England over the next decade.
Devolved spending
Regional bodies and mayors in England will be given greater powers over spending, starting with £285m next year for things like housing, transport and High Streets. In future the regions will be able to borrow to spend more on local priorities.