What is the Budget and what could be in it?
Chancellor John Healey will set out his plans for UK taxes in October.
What is the Budget and what could be in it?
Chancellor John Healey will outline Labour’s tax and spending plans when he presents his first Budget on 28 October.
He has declined to rule out tax rises after admitting that government borrowing costs are at "historic highs".
Still, the government has limited room to manoeuvre on tax.
Ahead of the 2024 general election, Labour pledged not to raise three major sources of government revenue: income tax, National Insurance and VAT.
In his statement to MPs in the House of Commons, Healey will explain how the government intends to increase or reduce taxes.
The Treasury will also release details of the measures and their costs alongside the Budget.
The independent Office for Budget Responsibility (OBR), which oversees government spending, will publish its own assessment of the UK economy’s condition and a forecast of what it expects to happen next.
The period leading up to the Budget usually brings plenty of speculation about what may be included, but the government is trying to keep that to a minimum this year.
Healey and Prime Minister Andy Burnham face a tricky balancing act: they want to provide more support for households and honour defence spending commitments, while also respecting Labour’s manifesto promises 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 pledged to keep. These are:
Not to borrow to fund day-to-day public spending by the end of this parliament
To get government debt falling as a share of national income by the end of this parliament
In March, the OBR estimated that the first rule would be met with a gap - or headroom - of £23.6bn. But that headroom is now expected to have narrowed.
Analysts at KPMG think it may have dropped to £12bn, largely because government borrowing costs have risen this year.
One possibility being discussed is that Healey could accept a smaller buffer, which would lessen the need to raise taxes in the Budget.
Your First Home scheme
More details on the "Your First Home" scheme, designed to help first-time buyers in England buy a property, are expected in the Budget.
The scheme will let people purchase a new-build home with a deposit of 2.5%. It would also give them a loan equal to 20% of the property’s value to help cover the purchase.
Capital Gains Tax
There has been speculation that Capital Gains Tax - which is charged on the profit people make when they sell an asset that has risen in value - could be altered, either by raising rates or by removing or changing exemptions.
Mansion Tax
The High Value Council Tax Surcharge - known as the Mansion Tax - was announced in last year’s Budget and will apply to properties in England worth more than £2m from April 2028. However, reports have indicated the government is considering widening it to properties valued above £1.5m.
Taxes on banks
Banks have been posting record profits, prompting union calls for higher taxes on the sector.
But banks have resisted, arguing that tougher levies would damage the government’s growth ambitions and make the UK less competitive.
In the first three months of the year, the UK economy expanded by 0.6%, although growth slowed to 0.4% in the April-to-June period.
The Office for National Statistics described that figure as "relatively robust", saying the UK grew faster than other G7 countries.
The latest figures showed the economy grew by 0.4% in July, far stronger than expected.
Analysts say the UK economy is holding up well despite energy price shocks triggered by the US-Israel war with Iran.
The conflict has effectively shut the Strait of Hormuz, an important route for oil and gas trade. That led to a sharp rise in oil prices, which has passed through into higher energy and fuel costs.
Economists expect UK growth to ease in the coming months as those costs continue to pressure households and businesses.
Prices for goods and services are still rising faster than desired. Inflation reached 3.1% in the year to August, the highest level in five months and above the Bank of England’s 2% target, driven by higher petrol and diesel prices.
The Bank of England kept interest rates at 3.75% for the sixth consecutive time in September, but said they would probably rise if high energy prices continue.
The Budget speech usually begins at around 12:30 UK time - after Prime Minister’s Questions - and lasts about an hour.
It will be shown live on BBC iPlayer and the BBC News website.
The Leader of the Opposition, Conservative MP Kemi Badenoch, will reply to the speech in the House of Commons.
MPs will debate the measures for four days before voting on them.
If MPs approve them, tax changes can take effect immediately.
However, the government must pass a finance bill to make them permanent.