The 2024 Autumn budget, the first from the new Labour government was delivered by Chancellor Rachel Reeves on Wednesday 30th October.
As expected, it had some dramatic changes for UK taxpayers, and some significant increases – and not all of them will be obvious.
The party’s election manifesto included a pledge not to increase taxes on "working people”, vowing not to raise VAT, income tax, or National Insurance contributions.
But the Chancellor told ministers that filling a much publicised £22bn black hole inherited from the previous government would only be enough to keep public services standing still. The NHS, schools and the defence sector will all receive boosts, while housebuilding and transport infrastructure spending will be increased.
The government also needs to find billions in new income to meet its commitments around rebuilding the NHS, fixing the care system, developing new homes and other promises in terms of improving public services available to citizens and encouraging investments.
The budget therefore needed to find an additional £40bn to avoid real-terms cuts and fund some major new initiatives. The Chancellor had forewarned the country that there would be some difficult decisions on spending, welfare, and tax to come in her budget.
What were these decisions, and how difficult would they actually be for us all as taxpayers?
Its not all bad news.
New single adult rate for minimum wage
The Government will move towards a single adult rate for the minimum wage. Rachel Reeves announced that the Low Pay Commission recommendation to increase the National Living Wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker. The National Minimum Wage for 18–20-year-olds will also be increased, initially to £10 an hour.
State pension to rise by 4.1% next year
The state pension will increase by 4.1% next year. The manifesto commitment to the Triple Lock means spending on the State Pension is forecast to rise by over £31bn by 2029-30. The Pension Credit Standard Minimum Guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner. However, with income thresholds set to remain frozen, an individual receiving the state pension will be taxed on their income from 2027.
Fuel duty to stay frozen
The fuel duty freeze will be kept in place. Rachel Reeves told the House of Commons: “I have decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.”
Carers
The Carers Allowance earnings threshold has increased, with the change taking place from April 2025. It means carers can earn more and still receive the government allowance, which currently is subject to an abrupt cutoff.
Business rates
Relief on business rates – the tax paid on retail, hospitality and leisure properties – will continue at 40% until 2025-26, up to a cap of £110,000 per business. From 2026-27 there will be two permanently lower tax rates. This should be a positive for small businesses – and high streets – up and down the country.
The government has honoured their pre-election pledge. There was no increase to employee’s National Insurance contributions, income tax, VAT or fuel duty – and a promise that allowances will start to be linked to inflation again from 2028.
There was also a reduction in duty on a pint in the pub. But the Chancellor’s generosity stopped there.
National Insurance for employers
While employee National Insurance contributions are set to be protected, Labour is increasing payments made by employers. Employers’ National Insurance by 1.2% to 15%, from April 2025.
The Secondary Threshold – the level at which employers start paying national insurance on each employee’s salary – will fall from £9,100 per year to £5,000.
This will raise £25bn per year by the end of the forecast period, but business groups have warned that higher employer NI could hinder job creation and make hiring more challenging, with economists suggesting that workers might ultimately bear the brunt of increased costs.
The rise will cost small business and it may be that some will reduce their workforce as a result.
With this in mind, the Chancellor increased the Employment Allowance from £5,000 to £10,500. This means 865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less as they did previously. This could actually stimulate employment allowing a small business to employ the equivalent of 4 full time workers on the National Living Wage without paying any National Insurance on their wages.
Inheritance tax
Inheritance tax (IHT), which is set at 40% on estates valued over £325,000, was also under the spotlight.
Inheritance tax thresholds will be frozen for another two years to 2030.
The first £325,000 of any estate can be inherited tax-free rising to £500,000 if the estate includes a residence passed to direct descendants and £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
But inflation will mean more families fall into the IHT trap, making this a stealth tax increase.
What’s more, inherited pensions will be brought into inheritance tax from April 2027. Currently, pensions are protected from the punitive 40pc charge and do not count towards the value of your estate. The Chancellor has thrown all that out and will include your pensions in the total value of your estate when you die.
This is likely to have a major impact on succession planning – it means that one of the keyways to protect your wealth from the taxman and ensure that it goes to your beneficiaries rather than him is going to be closed. Getting an expert view on the impact it could have on your loved ones is vital.
Agricultural property relief and business property relief have been changed. From April 2026 the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all. But for assets over £1m, inheritance tax will apply with a 50% relief - in other words at 20%.
Alternative Investment Market (AIM) companies had been concerned that their inheritance tax relief – one of the key reasons for this type of investment would be completely removed in the budget. IHT chargeable on most AIM shares will now be set at a rate of 20%, half the potential 40% benefit that was previously available
Capital gains tax
Capital gains tax (CGT) was also in the Chancellor’s sights. This is levied on the profit from selling assets such as second homes or investments. Higher earners currently pay 24% on additional property and 20% on other assets.
Both the lower and higher rates of capital gains tax will be increased for investors, although not for property investors.
The lower rate of Capital Gains Tax from 10% to 18%, and the Higher Rate from 20% to 24% while maintaining the rates of capital gains tax on residential property at 18% and 24%.
These increases, while significant, are lower than had been predicted, with fears that the Chancellor would equalize capital gains tax with income tax -which would mean taxes rising as high as 45% - proving unfounded.
Vaping liquid, tobacco and soft drinks
Rachel Reeves said tax on hand-rolling tobacco will increase by 10% while a flat rate levy will be imposed on all vaping liquid from October 2026. The Soft Drinks Industry Levy will be increased in line with inflation.
Non-dom tax
As expected, non-dom tax status will be scrapped from April next year. Rachel Reeves told the House of Commons: “, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”
The Office for Budget Responsibility forecast that scrapping the tax break for wealthy foreigners could raise about £3.2bn a year. However, there are concerns that such changes could generate less revenue than expected if non-doms head elsewhere.
Ideology aside, there have been concerns voiced that this will make London less attractive as a global financial capital.
Stamp duty increase
The Chancellor referred to the party manifesto and its stated commitment to reforming stamp duty land tax to raise revenue while supporting those buying their first home. There will be no increase for those buying a main home of their own to live in, but Stamp Duty Land tax will be increased for second home buyers, from 3% to 5%.
Rachel Reeves announced that from tomorrow, the stamp duty land tax surcharge for second properties known as the ‘Higher Rate for Additional Dwellings’ would rise from 3% to 5%.
The increase in stamp duty for second homes will fall onto the shoulders of renters, the head of the Institution of Fiscal Studies (IFS) has warned. An increase for those buying second properties might be aimed at wealthy people and landlords, but those looking to rent might pay part of the cost as extra costs mean that fewer rental properties are made available.
The prime minister has already said those who earn extra income from property and investments are not covered by Labour’s manifesto pledge to protect “working people” from paying more.
If you have property plans, you may need to look at them in light of these increases.
What impact will tax increases have?
Having announced where the money was coming from, the chancellor outlined some plans for spending it. The Office for Budget Responsibility said Rachel Reeves’ plan “delivers a large, sustained increase in spending, taxation, and borrowing”.
Public spending increases by almost £70bn a year over the next five years. The NHS will get a major funding boost with an extra £22.6 billion will be allocated to the day-to-day health budget while £3.1bn will be given for capital investment.
But although few people would object to increasing spending on schools and hospitals, there is a sure to be reaction to the tax increases.
In fairness, the UK’s tax to GDP ratio will still be comparatively low compared to other European nations – including countries such as Germany, Denmark and the Netherlands.
But most of us will be looking at the impact on our own financial plans. We may not be facing a cut in our take home pay, but we will be facing a world where tax has increased by other means. The effect of an NI increase may be hard to feel, unless we run a small business, but it is a very real increase, and the effects will filter through the economy.
Winners and losers – and you
State pensioners and minimum wage workers will be better off, and carers, drivers and drinkers may have reason to be cheerful, but most people will be looking at increases which affect them now, or their families when they die.
Any change in taxation and allowances could have a long-term effect on your financial plans – and this budget has plenty of impact for the short term too.
To understand the impact on your own finances, and to start working on some strategies to help to minimise them, expert advice is essential.
Call us at Continuum, to work out some personal budget reforms of your own.
Budget 2024 summary: Key points from Rachel Reeves’s speech - BBC News
Autumn Budget 2024: Martin Lewis analyses what it means
UK Autumn Budget 2024: the chancellor’s speech in full
What the Budget means for your money - and all the key policies
UK Autumn Budget 2024: Tax Hikes and Spending Surge Shape Economy - The Financial Analyst
This article is for information purposes only and does not constitute financial advice. You should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate taxation advice or estate planning and some aspects of Buy to Let mortgages.
Levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.
A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.
The value of an investment can go down as well as up and you may get back less than you invested. When investing Capital is at risk.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
The post The 2024 Autumn Budget special report appeared first on My Continuum.