Chancellor Rachel Reeves has announced the details of the Autumn Budget 2024. The decisions have been based on Labour’s pledge to ‘fix the foundations’ and restore economic stability. The key way to do this is to raise taxes by £40bn. Read on to find out what changes are to be made and how they may affect you.
Stamp duty
The stamp duty surcharge payable for second homes will increase from 3% to 5%. This will take effect from 31st October 2024.
National Insurance
National Insurance contributions for ‘working people’ will not be increased.
However, National Insurance payments to be made by employers will be increased, taking the contributions of 13.8% up to 15%. As well as that, the threshold at which National Insurance is to be paid for each employee has decreased from £9,100 to £5,000.
Some of the money raised from this is to be used to inject some cash into the NHS. This decision is a controversial one as Labour’s manifesto pledged not to increase this tax for ‘working people’. Chancellor Rachel Reeves has defended her decision by stating that working people are not directly affected by this.
However, with employers having to pay higher National Insurance contributions starting from a lower threshold of £5,000 per employee, there will be a knock-on effect on workers. Pay rises won’t be as readily available and some workers may even face a cut in their salaries so that their employers can afford to keep them on. Employers may also be reluctant or unable to employ new workers.
National Living Wage and National Minimum Wage
The National Living Wage will be increased by 6.7% from April 2025. This will take the minimum hourly rate for those aged 21 and over from £11.44 to £12.21. The National Minimum Wage for those aged 18 to 20 will increase from £8.60 to £10. For those aged under 18 and apprentices, it will increase from £6.40 to £7.55.
Employment Allowance
To help smaller businesses, the Employment Allowance will increase from £5,000 to £10,500. This increase means that 865,000 employers won’t have to pay National Insurance next year. Over a million employers will continue the pay the same amount as they have previously or, in some cases, less than this.
Income tax
The freeze on income tax, which was extended to April 2028 by the Conservative government, will not be extended again. Instead, personal tax thresholds will change in line with inflation from 2028–29.
VAT
From January 2025, VAT will be introduced on private school fees. From April 2025, legislation will be introduced to remove their business rates relief.
Inheritance tax
The current inheritance tax threshold freeze will continue for a further 2 years to 2030. This ensures that the first £325,000 of an estate can be inherited tax-free. If an estate includes a property to be passed to a direct descendant, this allowance increases to £500,000. When a tax-free allowance is passed to a surviving spouse or civil partner, this figure increases to £1m.
Inherited pensions will be brought into inheritance tax from April 2027.
Business Property Relief and Agricultural Property Relief will be reformed. From April 2026, no inheritance tax will be charged on the first £1m of combined business and agricultural assets. For assets valued at over £1m, inheritance tax will be applied with 50% relief. This will be at an effective rate of 20%.
Capital gains tax
Capital gains tax (CGT), which is charged on the profit when assets are sold, such as second homes and shares, is also to be increased. It is currently charged at a starting rate of 10% on profits of £3,000 or 18% for residential property. The starting rate will increase from 10% to 18% while the rate for residential property will remain at 18%. Currently, the higher rate charged is 20% on the profit gained from the sale of an asset or 24% for residential property gains. The rate of 20% will increase to 24% while the rate of 24% for residential property gains will remain the same.
Capital gains tax on carried interest will be increased to 32% from April 2025. Further reforms will be delivered from April 2026.
Business rates
The current business rate discount of 75% is due to expire in April 2025. This is to be replaced with a discount of 40% up to a maximum of £110,000.
Windfall tax
Windfall tax levied on oil and gas firms will increase to 38%, expiring in March 2030. The 29% investment allowance will be removed. Remaining in place, the decarbonisation allowance and 100% first year allowances will ensure job protection and energy security in that industry.
Housing
The provision of affordable housing has featured in the Autumn Budget 2024, with new funding to be provided that will take the housing supply investment over £5bn. The Affordable Homes Programme funds will be increased to £3.1bn. £3bn will also be provided to support small housebuilders and increase the supply of homes. An investment will also be provided to renovate sites across the country with the goal of delivering 2,000 new homes.
Right to Buy discounts will be reduced.
Funds of £1bn are being given to increase the rate at which dangerous cladding is removed from homes.
Pensions
The state pension triple lock will remain in place and spending is to increase by 4.1% in 2025–26. For over 12 million UK pensioners, this will be an increase of £470.
Fuel duty
The current 5p cut to fuel duty will be extended for another year and the freeze on fuel duty will continue next year.
Rail
The Trans-Pennine rail upgrade is being funded to ensure its delivery by the end of the year. Also to receive funding is the high-speed HS2 rail project.
Roads
Funds for road maintenance will be increased by £500m next year, with a focus on fixing potholes.
Bus fares
The £2 cap that has been in place for bus fares since 1st January 2023 will be increased to a cap of £3. This new cap will continue until the end of 2025.
Clean energy
A multi-year investment will be made into carbon capture and storage. Eleven new hydrogen projects will be funded across England, Scotland and Wales. Funds will also be provided to set up GB Energy in Aberdeen, Scotland.
NHS
With a key focus on improving the NHS, especially the patient waiting lists, significant funding has been allocated. A £22.6bn increase is being given to the day-to-day health budget while the capital budget will see an increase of £31bn. The aim is to increase the NHS capacity for procedures and significantly reduce patient waiting lists.
Carer’s allowance
The current weekly Carer’s Allowance of £81.90 will be increased to the equivalent of 16 hours at the National Living Wage per week. This means that carers can now claim the allowance while earning over £10,000 per year.
Universal Credit
To help relieve the pressure faced by 1.2 million of the poorest households, the debt repayments for Universal Credit will be reduced. The new ‘Fair Repayment Rate’ will reduce the monthly debt repayment from 25% to 15%.
Education
Funds of over £1.4bn are to be used to rebuild crumbling schools. The school rebuilding programme (SRP) was announced in 2020 to carry out major repair and refurbishment projects. This applies to schools and sixth-form colleges across England. The £1.4bn to be allocated is to ‘ensure delivery’ of the SRP’s plans. Funds of £2.1bn will also be provided to improve school maintenance.
A £1bn increase in funds is being allocated for special educational needs and disabilities. Investment will be tripled for free breakfast clubs in 2025–26 to £30m. The core school’s budget will be increased by £2.3bn. This will be used to employ more teachers in key subjects. Further education will benefit from funds of £300m.
Non-doms
A non-dom is a UK resident who has a permanent home outside of the UK registered for tax purposes. This means that they only pay UK tax on money that has been earned in the UK. They are not taxed on anything earned overseas. The current non-dom tax regime will be abolished and a new residence-based scheme will be introduced. This will apply to those coming to the UK on a temporary basis and will include ‘internationally competitive arrangements’.
Investment plans
Focusing on sectors that offer the biggest growth potential, funding is being provided to promote a ‘modern industrial strategy’. The aerospace sector will receive almost £1bn and the automotive sector will receive over £2bn. A new Life Sciences Innovative Manufacturing fund will receive up to £520m.
Core research funding of at least £6.1bn will be provided for the engineering, medical science and biotechnology sectors.
Tobacco duty
The tobacco duty escalator will be renewed so that taxes will increase by the Retail Price Index (RPI) measure of inflation plus 2%. Duty on hand-rolled tobacco will be increased this year by 10% and a one-off tobacco duty increase will be made to encourage smokers to stop smoking. A flat-rate duty will be charged on vaping liquids from 2026.
Alcohol duty
Duty charged on draft alcohol will be cut. Non-draught products will be subject to an alcohol duty increase in line with RPI from February 2025.
Electric vehicle incentives
Existing company car tax incentives for electric vehicles will be maintained from 2028. From April 2025, the differential will be increased between fully electric vehicles and others regarding the first Vehicle Excise Duty rates.
Air passenger duty
An increase of no more than £2 is being introduced for air passenger duty on economy-class short-haul flights. For private jets, an increase of 50% will be charged.
Defence spending
The budget for the Ministry of Defence will be increased by £2.9bn next year. Military support for Ukraine will continue for as long as is needed with funds of £3bn per year. The 80th anniversary of VE and VJ days in 2026 will receive funding in honour of those who served at home and abroad.
Fraud crackdown
Funds are to be invested to modernise HMRC systems to ensure people pay on time, outstanding debts are cleared and, primarily, to prevent tax avoidance.
Get Britain Working
A ‘Get Britain Working’ white paper will be published detailing measures to get unemployed people back into work. This will reduce the current strain on the benefits system.
Local governments
Local governments will benefit from increased funding next year, beginning with Greater Manchester and the West Midlands.
Public services in Scotland, Wales and Northern Ireland
Funding is to be provided to support public services in Scotland, Wales and Northern Ireland. The Scottish government will receive £3.4bn, the Welsh government will receive £1.7bn and the Northern Ireland executive will receive £1.5bn in 2025–26.
Compensation for scandal victims
Funding of £11.8bn is to be provided for victims of the infected blood scandal as compensation. For victims of the Post Office scandal, £1.8bn is to be provided as compensation.
Get expert advice from our mortgage and protection brokers following the Autumn Budget 2024
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