Autumn Budget 2024

Status: Information Only

Introduction

Rachel Reeves has delivered her maiden Budget under the Labour Government and becomes the first female chancellor in 800 years to do so. She has repeatedly warned that it will involve "difficult decisions", with tax rises and spending cuts of up to £40bn expected.

Bear in mind a lot of the actual detail is contained in the supplementary Treasury notes and guidance that follow the Budget, so we expect some further analysis over the coming days.

Inflation Predictions - OBR

OBT states previous Government did not supply all the correct information. The OBR say the updated CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.

Personal Finance and Taxation

Minimum Wage

• Announced ahead of the Budget, minimum wages will rise for all over 21 from 6th April 2025. The minimum wage for over 21s (known officially as the National Living Wage), will rise by 6.7%, from £11.44 to £12.21.

• For 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10.

• Apprentices will get the biggest pay bump, from £6.40 to £7.55 an hour.

State Pensions

The State Pension is expected to rise by 4.1% in April 2025.

Government will continue to honour the ‘triple lock’.

Pensions

No change to tax relief on pension contributions.

No change to pension commencement lump sums (TFC).

Pensions on death to be assessable to IHT, see below.

QROPS

The government will remove the exclusion from the Overseas Transfer Charge for transfers to Qualifying Recognised Overseas Pension Schemes in the European Economic Area (EEA) or Gibraltar from 30 October 2024.

This is to address the risk of individuals receiving double tax-free allowances.

Mineworkers Pension Scheme

The chancellor has scrapped a controversial arrangement that saw the government receive hundreds of millions of pounds from a pension scheme for mineworkers. The government had been entitled to half the surplus cash from the scheme under an agreement signed 30 years ago. It’s understood the change will see a total of around £1.5bn transferred into the pension pots of 112,000 former coalminers.

Announcing the news in today’s Budget, Reeves says it would mean “working people who powered our country receive the fair pension they are owed".

National Insurance Contributions

Employee NICs

No changes / increases.

There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government. From 2028-29, personal tax thresholds will be uprated in line with inflation.

Employer NICs

Lowering of employers NI threshold from £9,100 to £5,000

Increase to employers NI rate from 13.8 to 15%.

This takes affect from 6th April 2025 and is likely to raise £25bn.

Employment Allowance

The Employment Allowance will increase from £5,000 to £10,500, which the Chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year. She adds over one million will pay the same or less as they did previously.

Personal Income Tax Thresholds

No changes /increases

IHT

IHT threshold freeze for a further two years to 2030. That means 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.

The government is also removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning by bringing unspent pots into the scope of inheritance tax from April 2027.

Reform of Agricultural Property Relief and Business Property Relief.

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 50% relief, at an effective rate of 20%.

The current inheritance tax thresholds are due to be frozen until April 2028, and the government is extending these threshold freezes for a further two years to April 2030.

The government will reform agricultural property relief and business property relief from April 2026. In addition to existing nil-rate bands and exemptions, the 100% rate of relief will continue for the first £1 million of combined agricultural and business assets to help protect family farms and businesses and will be 50% thereafter.

The government will also reduce the rate of business property relief to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as AIM. This will affect around 0.3% of estates each year.

CGT

The main rates of CGT are currently charged at a lower rate of 10% and a higher rate of 20%, and these will be increased to 18% and 24% respectively from 30 October 2024. These new rates will match the residential property rates, which are not changing.

There are two reliefs which offer access to a lower rate of CGT: Business Asset Disposal Relief (BADR), and Investors’ Relief (IR). The rate for both BADR and IR will increase gradually, to give business owners time to adjust to the changes. The BADR and IR rates will rise to 14% from 6 April 2025 and will match the main lower rate of 18% from 6 April 2026.

School Fees

The government will introduce 20% VAT on education and boarding services provided for a charge by private schools from 1 January 2025. The government will also remove business rates charitable rate relief from private schools in England from April 2025.

Stamp Duty

The government is increasing the Higher Rates for Additional Dwellings of Stamp Duty Land Tax from 3% to 5% from 31 October 2024. These higher rates apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property.

Those who exchanged contracts prior to 31 October 2024 are not affected by this rate increase.

Non-Doms

Nom Dom tax regime will be abolished. The “outdated concept” of domicile will be removed from the tax system from April 2025.

This applies to a UK resident whose permanent home - or domicile - for tax purposes is outside the UK. It means they do not pay UK tax on money they make elsewhere in the world.

Instead, a new residence-based scheme will be introduced "internationally competitive arrangements" for those coming to the UK on a temporary basis. The Office for Budget Responsibility says this package of measures will raise £12.7bn over the next five years, she says.

Fuel Duty

No increase to fuel duty for next year, this will be frozen again.

As well as honouring the 5p cut for another year.

Business Related

Technology & Science

The government will protect government investments in research and development "to unlock these growth industries of the future" with more than £20bn of funding. At least £6.1bn to protect core research funding for areas like engineering, biotechnology and medical science.

NHS

There will be a 10-year plan to address the health system in the spring. The NHS will receive new funding under this Budget. Reeves announces a £22.6bn increase in the day-to-day health budget, and a £31bn increase in the capital budget, which she says is the largest increase in spending outside of Covid since 2010.

The measures will bring down waiting lists and increase the capacity for procedures in the NHS.

See press release here: New funding to kickstart delivery of two million extra NHS appointments - GOV.UK

Schools & Education

On schools, the Budget promises an additional £6.7bn to the Department for Education next year, - a 19% real-terms increase on this year. This includes over £1.4bn to rebuild 500 schools "in the greatest need".

A further £2.1bn more to improve school maintenance, an increase of £300m on this year.

One of the most pressing issues in schools in England has been given a cash injection by the chancellor, with a £1bn pound increase for special educational needs and disabilities.

It’s just a few days since the official spending watchdog warned the system was financially unsustainable.

This 6% increase will be welcome easing of pressure, but it does not address the deficits of more than £4bn that have built up in local authorities.

The core education budget is also going up by £2.3bn, and the £300m for further education will be welcomed by colleges who often feel overlooked.

Transport

HS2 - On HS2 - the high-speed rail project - Reeves says they are committing the funding to begin tunnelling work to London Euston, meaning Old Oak Common in West London and Euston.

It was one of the sections of the multi-billion pound rail project that had been scrapped by the Conservative government.

Without the link to Euston, people travelling between Birmingham and London would arrive at Old Oak Common and have to take another train to travel into the centre of the capital.

Potholes – £500m increase for road maintenance and a commitment to fix an additional one million potholes a year.

Get Britain Working

• £240 million Get Britain Working package to include work, skills and health support for disabled people and long-term sick.

• Benefit reform to be accelerated from this autumn to give more people access to employment support.

See press release here: Chancellor: "We will build a Britain where those who can work, will work" - GOV.UK

Energy windfall tax increase

The government is increasing the windfall tax on the profits oil and gas firms make in the UK. This is due to rise to 38% from 35% on the 1st November and will remain in place until 31st March 2030.

Miscellaneous

Housing

The government will invest more than £5bn to deliver their housing plan. The Budget will increase the Affordable Homes Programme to £3.1bn, provide £3bm worth of support and guarantees to increase the supply of homes and support small housebuilders.

The Budget promises to provide investment to renovate sites across the country - including at Liverpool Central Docks - to deliver 2000 new homes.

Winter fuel payments

The Government has said future payments will only be made to those getting pension credit or other means tested help.

Infected Blood Compensation Scheme

£11.8bn to be set aside for compensation.

Post Office Compensation Scheme

£1.8bn to be set aside for compensation.

Ukraine

A £2.9bn increase to the Ministry of Defence's budget next year. A pledge of guaranteed military support to Ukraine of £3bn a year for "as long as it takes". Funding will be allocated for the 80th anniversary of VE and VJ days in 2026 to honour those who "have served at home and abroad".

Air Duty

An increase of no more than £2 for an economy-class short haul flight. But on private jets, an increase by a further 50% - equivalent to £450 per passenger for a private jet.

Alcohol

A cut to duty on draft alcohol, equating to a penny off a pint.

Alcohol duty rates on non-draught products will increase in line with RPI from February next year.

Tobacco & Vaping

The Government will renew the tobacco duty escalator which means that taxes will rise by the Retail Price Index (RPI) measure of inflation as well as 2%.

In addition, an increase in duty by 10% on hand-rolled tobacco this year, introduce a flat-rate duty on all vaping liquid from 2026, and a one-off increase in tobacco duty to maintain the incentive for smokers to give up smoking.

Bus Fare Increase

The single bus fare cap applied to many routes in England will be raised to £3. It is an increase on the current limit of £2.