Chancellor Rachel Reeves is raising taxes by more than expected, borrowing more than expected and imposing higher taxes on employers than expected.
Beginning her historic budget yesterday, Reeves hit out at the situation left by the previous Tory government, stating it had not provided the Office for Budget Responsibility (OBR) with all the information and that forecasts would have been "materially different" had it done so.
As feared, Reeves announced the controversial windfall tax on oil and gas producers is to be etended until 2030 and increase to 38%, bringing the headline tax rate to 78%.
She also removed the 29% investment allowance.
Among the other key decisions, Reeves announced the national living wage would rise 6.7% from £11.44 an hour to £12.21 for over 21s.
She also hiked National Insurance contributions for employers from 13.8% to 15%, effective from April next year.
The threshold at which employers are required to start making contributions will also drop from £9,100 to £5,000.
A permanently lower business rates multiplier for retail, hospitality and leisure premises was also announced from 2026/27, with a 40% business rates relief provided, capped art £110,000 per business for next year and 2026.
Reeves also announced an immediate capital gains tax rise to 24% on sales of shares and other assets.
The current 10% rate for people selling their own businesses will also rise to 14% from April and then 18% from April 2026.
The non-dom tax regime, which allowed 50% discounts to foreign nationals living in the UK on their overseas income has been "abolished".
Draught duty is being cut by 1.7%, which Reeves equated to being "a penny off pints in pubs", drawing raucous cheers.
Fuel duty has been frozen again, with the temporary 5p per litre cut extended by a year.
On borrowing, the chancellor confirmed she would change government rules to allow it to plough up to £50billion into new infrastructure projects.
Reeves promised a £22.6billion increase in the NHS day-to-day budget, along with a £3.1billion rise in the capital investment budget for this year and next.
It comes as the government works towards the goal of reducing appointment waiting times to no longer than 18 weeks.
Reacting to the Budget, Shevaun Haviland, director general of the British Chamber of Commerce, said: “This is a tough budget for business to swallow but the chancellor has looked to ease the pain by holding out a promise of better days ahead.
“While some protection for smaller firms is welcome, the increase in employer National Insurance Contributions will place a further cost burden on business. This, coupled with a 6.7% increase in the National Living Wage, means many firms will find it more challenging to invest and recruit in the short-term.
“But the chancellor has looked to off-set the upfront hit on firms by outlining a longer-term framework to provide stability for the economy.
“Plans to raise infrastructure spending, sector-specific business rates relief and additional support for small business will take some of the sting out of the tax rises. And it is encouraging to see full expensing and the annual investment allowance made permanent alongside R&D relief being retained.
“The chancellor has also listened to our request to retain first year allowances for investments in the North Sea to help provide a just transition to Net Zero.
“Much now rests on the government’s next steps, with the future benefits outlined by the chancellor by no means guaranteed. A lot will be riding on the success of the industrial and trade strategies, and the effectiveness of devolution and public investment in infrastructure to reinvigorate regional supply chains.
“To build business confidence, it’s crucial that we now see decisive and inclusive action at pace from the government to unlock the investment the economy sorely needs.”
Meanwhile, The McGinty's Group boss has warned of business closures following the chancellor's "hammer blow" to hospitality, The Press and Journal reports.
Allan Henderson, director of the organisation, said the industry had received a double hit with National Insurance contributions going up at the same time as the minimum wage.
Speaking to the P&J, he said: “It’s an absolute nonsense to say you are chasing growth and then hammer the businesses that create the growth.
“This will close businesses. It’s disastrous news for the hospitality industry."