Understanding the UK’s Autumn Budget 2024: Key Changes and Insights
The UK’s Autumn Budget for 2024, presented by Chancellor Rachel Reeves, brings significant updates across tax, benefits, wages and public funding. The budget aims to address the economic shortfalls, revitalize public services and promote fairness in the tax system. Here are the main takeaways:
1. Tax Increases and Reforms
• Income Tax and National Insurance: The budget sees no change in personal income tax rates or VAT, maintaining the status quo for most workers. However, employers will face a rise in National Insurance contributions, increasing by 1.2% to reach 15% from April 2025. The secondary threshold for contributions will also shift down from £9,100 to £5,000, affecting medium and large employers most significantly, meaning the point at which employers begin incurring national insurance on a salary will be lower.
• Employer Allowance: Smaller companies are protected by the above as employment allowance will increase to £10,500, meaning they will not pay Employers NI up to this new rate.It could be an important decision to add your spouse as an employee moving forward to qualify for the allowance.
• Personal Allowance: From the 28/29 tax year the personal allowance will increase in line with inflation.
• Capital Gains Tax (CGT): CGT rates will rise, with the basic rate moving from 10% to 18% and the higher rate from 20% to 24%, targeting higher-earning investors and aligning CGT more closely with income tax. The rates on residential property will remain at 18% and 24%.
• Business Asset Disposal Relief: Business Asset Disposal Relief remains in place, in order to encourage entrepreneurs to invest in their businesses, the lifetime limit for Business Asset Disposal Relief would be kept at 1 million pounds, and would remain at 10% this year, rising to 14% in April 2025 and 18% in 2026-27.
• Inheritance Tax: A freeze on inheritance tax will continue until 2030, with targeted relief on certain assets like business and agricultural holdings. 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. Notably, the loophole allowing pensions to escape inheritance tax is set to close by April 2026.
• Corporate Tax Remains the same: The corporate tax rate will be capped at 25% (19% for profits below £50,000) .The £1 million Annual Investment Allowance to support business expansion remains along with full expensing.
• Business Rates: The current 75% discount to business rates is due to expire in April 2025 - This will be replaced by a discount of 40% - up to a maximum discount of £110k.
2. Minimum Wage and Benefits Adjustments
• National Minimum Wage: Starting in April 2025, the minimum wage for workers over 21 will rise to £12.21, marking a 6.7% increase, while those aged 18-21 will see a substantial 16.3% boost in hourly pay to £10.00.
• Carer’s Allowance: The budget extends support for carers by increasing the income threshold to £10,000 annually, providing more flexibility for carers to work additional hours without losing their benefits.
3. Sector-Specific Levies and Adjustments
• Fuel Duty: Contrary to expectations, fuel duty will remain frozen for the next two years to mitigate potential inflationary pressures on consumers.
• Alcohol and Tobacco: Alcohol duties on non-draft items will align with the retail price index (RPI), while draft alcohol products will see a slight reduction by 1.7%. Tobacco and vaping products will incur higher duties, aimed at both raising revenue and discouraging consumption.
• Environmental and Transport Levies: Air passenger duty will see a minor adjustment, with private jet travel seeing a 50% duty increase to promote more sustainable transport.
4. Education and Housing Reforms
• Private Education: VAT on private school fees will be implemented in January 2025, alongside a removal of business rate relief, aiming to bridge the financial disparity between private and state schooling.
• Stamp Duty: The budget raises stamp duty land tax (SDLT) on second homes by an additional 2% effective immediately, a move expected to curb the rapid investment in multiple properties and support first-time buyers.
5. Strengthening Compliance and Closing Loopholes
• Anti-avoidance Measures: Investment in modernizing HMRC and increased oversight on umbrella companies will be implemented to clamp down on tax avoidance, particularly within employment structures that complicate direct taxation.
• Non-Domiciled Tax Status: The long-debated abolition of the non-domiciled (non-dom) tax status will take effect in April 2025, transitioning to a residence-based tax scheme to ensure fairness and compliance.
Final Thoughts
The 2024 budget reflects a commitment to tackle economic inequality while investing in essential services. While some measures may place additional burdens on businesses and higher earners, the government’s aim is to achieve a more balanced, sustainable economy.
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