Labour’s tax policy since taking office in 2024 keeps income tax rates, employee National Insurance, and VAT frozen at their existing levels while raising revenue from employers, investors, larger estates, non-domiciled residents, oil and gas producers, and private school fees. The manifesto “tax lock” defines the perimeter the government says it will not cross; almost every major money-raising measure in the October 2024 Autumn Budget was designed to fall outside it.
What The Tax Lock Actually Covers
Labour’s 2024 manifesto promised no increases to the basic, higher, or additional rates of income tax, no increase to employee National Insurance, and no increase to VAT. Corporation tax was separately capped at 25 percent for the duration of the parliament. Those four commitments are the fixed points. Everything else has moved, and in several cases moved significantly.
A word of warning before reading the rate tables: a frozen rate is not the same as a frozen tax bill. Thresholds for income tax and inheritance tax have been held flat while wages and asset values keep rising, which quietly pulls more people into higher bands each year.
Income Tax: Rates Held, Thresholds Frozen
For 2025-26, the three income tax rates in England, Wales, and Northern Ireland remain 20 percent (basic), 40 percent (higher), and 45 percent (additional), and are expected to hold through 2026-27.1HM Revenue & Customs. Income Tax Rates and Allowances for Current and Previous Tax Years The personal allowance is £12,570, the basic rate band runs to £50,270 of total income, and the additional rate begins above £125,140.2GOV.UK. Income Tax Rates and Personal Allowances
These thresholds have been frozen since 2021 and will stay frozen through at least April 2028. Every pay rise that tracks inflation pushes a slightly larger slice of earnings into the next band. The rates do not need to change for the effective tax take to rise, and that is the point.
National Insurance: Employees Untouched, Employers Hit Hard
Employee contributions stayed at 8 percent on earnings between the primary threshold and the upper earnings limit for 2025-26, and 2 percent above the upper earnings limit of £967 per week.3GOV.UK. National Insurance Rates and Categories Those rates sit inside the tax lock and are not expected to move before the next general election.
Employers are a different story. The Autumn Budget 2024 raised employer National Insurance from 13.8 percent to 15 percent and dropped the secondary threshold from £9,100 to £5,000 per year, both effective from April 2025.4GOV.UK. Autumn Budget 2024 – GAD Technical Bulletin The lower threshold means contributions kick in far earlier on each employee’s pay. This is the largest single revenue-raising measure in the package, and it applies to businesses, charities, and public sector employers alike. The government’s position is that it falls outside the tax lock because employers, not employees, write the cheque.
Capital Gains Tax
The Autumn Budget 2024 raised the main capital gains tax rates on disposals other than residential property. The lower rate moved from 10 percent to 18 percent and the higher rate from 20 percent to 24 percent, effective 30 October 2024.5GOV.UK. Changes to the Rates of Capital Gains Tax Residential property gains are also taxed at 18 percent and 24 percent. The annual exempt amount stays at £3,000. Business Asset Disposal Relief moved to 14 percent from April 2025 and rises to 18 percent from April 2026.
Carried Interest
Private equity carried interest was raised to a flat 32 percent from April 2025 as a transitional step.6HM Revenue & Customs. Capital Gains Tax Rates and Allowances From April 2026, carried interest will be reclassified as trading profits and taxed under the income tax framework, with a 72.5 percent multiplier applied to income tax plus Class 4 National Insurance rates. That produces an effective marginal rate of about 34.1 percent for additional-rate taxpayers.7Office for Budget Responsibility. Costing of Changes to the Carried Interest Regime That is well above the previous 28 percent higher rate, though the built-in discount for qualifying holdings keeps it short of the full 45 percent income tax rate.
Inheritance Tax
The standard inheritance tax threshold remains £325,000, with an additional residence nil-rate band of £175,000 available when a home passes to direct descendants. Both are frozen until April 2030.8HM Revenue & Customs. Inheritance Tax Thresholds and Interest Rates Value above the allowances is taxed at 40 percent.9GOV.UK. How Inheritance Tax Works: Thresholds, Rules and Allowances The same fiscal drag effect that touches income tax applies here: as property values rise, more estates cross the line.
Agricultural And Business Property Relief
The politically loudest change targets agricultural property relief and business property relief. Qualifying farmland, farm buildings, and business assets have historically passed on death with 100 percent relief, effectively tax-free. From April 2026, full relief is capped at a combined £2.5 million per estate, with 50 percent relief on value above that threshold.10House of Commons Library. Changes to Agricultural and Business Property Reliefs for Inheritance Tax The original cap announced in October 2024 was £1 million; the government raised it to £2.5 million in December 2025 after sustained pressure from farming groups. Multi-generational family farms with large land holdings can still face tax bills that would previously have been avoided.
Non-Dom Status Replaced
The remittance basis for non-UK domiciled individuals was abolished on 6 April 2025 and replaced with a residence-based system.11HM Revenue & Customs. Reforming the Taxation of Non-UK Domiciled Individuals Under the old rules, non-doms could live in the UK and pay UK tax only on foreign income they actually brought into the country. The new system taxes long-term UK residents on their worldwide income and gains as they arise.
New arrivals get a four-year window under the Foreign Income and Gains (FIG) regime. To qualify, you must be within your first four UK tax years of residency after at least ten consecutive years as a non-resident. During those four years, eligible foreign income and gains are not taxed in the UK, but claiming the relief means giving up your personal allowance and capital gains annual exempt amount for the year.12GOV.UK. Check if You Can Claim the 4-Year Foreign Income and Gains Regime After year four, worldwide taxation applies in full.
For former remittance-basis taxpayers, a Temporary Repatriation Facility lets them bring pre-April 2025 foreign income and gains into the UK at 12 percent during the 2025-26 and 2026-27 tax years. From 2027-28, those remittances are taxed at normal rates.13GOV.UK. Technical Note: Changes to the Taxation of Non-UK Domiciled Individuals The 12 percent window is designed to draw money into the UK before the full regime takes hold.
VAT On Private School Fees
From 1 January 2025, private school fees for education, vocational training, and boarding are subject to VAT at the standard 20 percent rate. These services were previously exempt under the Value Added Tax Act 1994.14HM Revenue & Customs. Applying VAT to Private School Fees The change works by inserting exceptions into the Act’s exemption schedule, so state-funded and charitable education providers still qualify while private schools no longer do.15GOV.UK. Private Schools EN Nursery classes remain exempt.
Separately, private schools in England with charitable status lost their eligibility for business rates charitable relief from April 2025, which had previously covered 80 percent of their business rates liability. Schools primarily serving children with Education, Health and Care Plans keep the relief.16legislation.gov.uk. Non-Domestic Rating (Multipliers and Private Schools) Act 2025 The revenue is earmarked for state education, including a commitment to recruit 6,500 new teachers.17GOV.UK. 6,500 Additional Teachers Delivery Plan
Energy Profits Levy
Oil and gas producers face the Energy Profits Levy on top of standard corporation tax and the supplementary charge. The rate rose from 35 percent to 38 percent on 1 November 2024, taking the combined headline rate on upstream oil and gas profits to 78 percent.18GOV.UK. Changes to the Energy (Oil and Gas) Profits Levy The levy has also been extended through March 2030.19Office for Budget Responsibility. Oil and Gas Revenues
Alongside the rate increase, the government scrapped the main 29 percent investment allowance for expenditure incurred from 1 November 2024 and reduced how capital allowances feed into the levy calculation. The old investment allowance had let companies offset a substantial share of levy liability by reinvesting in fossil fuel extraction. Its removal means the 78 percent headline rate now bites closer to actual profits.
Stamp Duty Reverts
Labour let the pandemic-era stamp duty thresholds expire on 31 March 2025. The nil-rate threshold for standard purchases reverted from £250,000 to £125,000, and the first-time buyer threshold dropped from £425,000 to £300,000.20GOV.UK. Stamp Duty Land Tax: Residential Property Rates A buyer purchasing at £300,000 now pays stamp duty on £175,000 of value that was previously sheltered. First-time buyers cannot claim the relief at all on purchases above £500,000. This was not a legislated tax rise, but letting the relief lapse produced the same effect on transaction costs.
Corporation Tax And Business Investment
The main corporation tax rate is capped at 25 percent for profits above £250,000 for the duration of the parliament.21HM Revenue & Customs. Corporation Tax Rates and Allowances Small companies with profits under £50,000 pay a 19 percent small profits rate, with marginal relief between £50,000 and £250,000. The government publishes a Roadmap for Business Taxation to give companies forward visibility on rates and reliefs.
Full expensing continues, letting companies deduct 100 percent of the cost of qualifying plant and machinery from taxable profits in the year of purchase.22GOV.UK. Capital Allowances Full Expensing and 50% First-year Allowance A 50 percent first-year allowance applies to special rate assets. Research and development tax credits remain in place. Between them, these reliefs pull effective tax rates well below the 25 percent headline for companies with significant qualifying investment.