Why is the tax burden set to rise for so many?
The Chancellor of the Exchequer, Rachel Reeves, delivered her maiden Autumn Budget Statement 2024 on Wednesday 30 October, alongside an updated economic forecast from the Office for Budget Responsibility. Three months after coming to power, she set out the government’s taxing, borrowing and spending plans.
It is the first time the Labour party has had a chance to do this in 14 years. The Chancellor began by saying the Conservative party had presided over a period of economic decline that, she said, had left the country and its public services on its knees.
She said the way to turn the country’s fortunes around was to ‘invest, invest, invest’, spending an extra £70bn a year. To do that, she needs money. And the money she intends to use will come from tax rises. Big tax rises. And the government also intends to borrow a lot more money.
The Chancellor set out plans to raise £40bn. She had promised not to put these rises on ‘working people’ without precisely defining who she meant. ‘I know that this is a difficult choice,’ she said. ‘I do not take this decision lightly. We are asking businesses to contribute more, and I know that the impact of this measure will be felt beyond businesses, but in the circumstances that I have inherited, it is the right choice to make.’
Main announcements from Chancellor Rachel Reeves at a glance
What does the Autumn Budget Statement 2024 mean for your money? Chancellor Rachel Reeves delivered Labour’s first Budget since 2010 on 30 October, after the party’s return to power in July’s general election. She announced tax rises worth £40bn, commenting that these would rebuild public services and stabilise the public finances.
Economy
- Office for Budget Responsibility predicts the UK economy will grow by 1.1% this year, 2% next year and 1.8% in 2026
- Inflation is predicted to average 2.5% this year and 2.6% next year before falling to 2.3% in 2026
- The official definition of UK government debt loosened by including a wider range of financial assets, such as future student loan repayments
Personal Taxation
- Rates of Income Tax and National Insurance (NI) paid by employees, and of VAT, to remain unchanged
- Income Tax band thresholds to rise in line with inflation after 2028, preventing more people being dragged into higher bands as wages rise
- Basic rate Capital Gains Tax on profits from selling shares to increase from 10% to 18%, with the higher rate rising from 20% to 24%
- Rates on profits from selling additional property unchanged
- Inheritance Tax threshold freeze extended by further two years to 2030, with inherited pension pots also subject to the tax from 2027
Wages, benefits and pensions
- Legal minimum wage for over-21s torise from £11.44 to £12.21 per hour from April
- Rate for 18 to 20-year-olds to go up from £8.60 to £10, as part of a long-term plan to move towards a ‘single adult rate’
- Basic and new State Pension payments to go up by 4.1% next year due to the ‘triple lock’, more than working age benefits
- Eligibility widened for the allowance paid to full-time carers, by increasing the maximum earnings threshold from £151 to £195 a week
Housing
- Social housing providers to be allowed to increase rents above inflation under multi-year settlement
- Stamp duty surcharge, paid on second home purchases in England and Northern Ireland, to go up from 3% to 5%
- Current affordable homes budget, which runs until 2026, boosted by £500m
Transport
- 5p cut in fuel duty on petrol and diesel brought in by the Conservatives, due to end in April 2025, kept for another year
- £2 cap on single bus fares in England to rise to £3 from January
- Commitment to fund tunnelling work to take HS2 high-speed rail line to Euston station in central London
- Commitment to deliver upgrade to trans-Pennine rail line between York and Manchester, running via Leeds and Huddersfield
- Air Passenger Duty on flights by private jet to go up by 50%
- Extra £500m next year to repair potholes in England
- Vehicle Excise Duty paid by owners of all but the most efficient new petrol cars to double in their first year, to encourage shift to electric vehicles
Business Taxes
- Companies to pay NI at 15% on salaries above £5,000 from April, up from 13.8% on salaries above £9,100, raising an additional £25bn a year
- Employment Allowance – which allows smaller companies to reduce their NI liability – to increase from £5,000 to £10,500
- Tax paid by private equity managers on share of profits from successful deals to rise from up to 28% to up to 32% from April
- Main rate of Corporation Tax, paid by businesses on taxable profits over £250,000, to stay at 25% until next election
Government spending and public services
- Extra £22.6bn for day-to-day spending on the NHS in England, and a £3.1bn boost to budget for investment
- £6.7bn allocated for education investment next year, with £1.4bn earmarked for rebuilding over 500 schools
- Defence spending to rise by £2.9bn next year
Other measures
- £11.8bn allocated to compensate victims of the infected blood scandal, with £1.8bn set aside for wrongly prosecuted Post Office sub-postmasters
- Government to stop receiving surplus cash from pension scheme for mineworkers
- Extra spending in England will lead to £3.4bn more for Scotland, £1.7bn more for Wales and £1.5bn more for Northern Ireland in devolution payments
What does the Autumn Budget Statement 2024 mean for you?
Our comprehensive Autumn Budget Statement 2024 guide looks at the pivotal announcements and what they could mean for your finances or business. If you want to find out more or to discuss how the announced measures might affect you, please contact Fitch & Fitch for further details.