The UK’s new Labour government announced a significant tax hike aimed at generating an additional £40 billion ($51.8 billion) to fill a major budget gap and address mounting economic challenges. UK Chancellor of the Exchequer Rachel Reeves introduced the financial plan on Wednesday, outlining several tax increases targeting businesses, high-earners, and various consumer goods, which will help alleviate the fiscal strain inherited from the previous Conservative government.
Key measures include raising mandatory national insurance contributions for employers, higher capital gains taxes, and an excess profit tax for energy companies. The government also plans to increase excise duties on carbonated drinks, introduce a VAT on private school tuition fees, and implement duties on vaping products starting in 2026. Furthermore, the Labour government will eliminate the special tax regime for individuals residing in the UK but domiciled abroad, a move expected to increase tax revenue from wealthy expatriates.
Reeves stressed the urgency of the plan, pointing to the struggling UK economy, which she previously described as facing its toughest period since World War II. The new budget reflects Labour’s strategy to restore economic stability and tackle what Reeves described as a £22 billion “hole” left by the prior administration.
