After months of uncertainty following the 2024 election, the government finally delivered the first budget of the new Parliament. As well as being the first Labour budget in 14 years, it was also the first budget delivered by a female Chancellor. Since getting into government, the Chancellor has been keen to remind the public of the poor state of the public finances, with the oft-repeated message of the “22 billion pound black-hole” left by the Conservatives precipitating a budget which included 40 billion pounds in tax rises.
Nevertheless, the government also announced a range of public spending measures aimed at delivering growth for a stagnant UK economy and supporting struggling public services. This impact of the Autumn Budget 2024 could be seismic and will be of significant interest to employers and employees alike.
What taxes did the government raise?
The 2024 Autumn Budget represents a significant increase in taxes which raises the tax burden to the highest level since the late 1940s.
As a result, there were some very significant tax rises announced by the Chancellor. Let’s take a look at some of these announcements on tax and spend.
Business taxes
Business swallows the vast majority of the tax increases introduced by the Chancellor, with the rise in employers’ national insurance making up over half of the tax rises. Here are the business tax announcements in full:
- 2% rise in employers’ national insurance contributions worth £25bn by the end of the Parliament.
- Threshold employers pay on national insurance cut from £9100 pa to £5000.
- However, doubling of employment allowance from £5000 to £10,500, doubling the amount businesses can reduce their national insurance liability by
- Increased taxes on private equity bosses for successful deals from up to 28% to 32%
- Energy profits levy due to rise to 38%
- Raise in capital gains tax – both lower rate from 10% to 18% and higher rate from 20% to 24%
- Capping of corporation tax at 25% for the remainder of the Parliament
Personal tax
The government’s promises “not to raise taxes on working people” left them with little wiggle room when it came to increasing taxes to fill the fiscal black hole in the public finances. As a result, personal taxes were largely untouched. The Chancellor had been expected to extend the freeze on personal tax thresholds beyond 2028 but has not done so. Some of the headline announcements include:
- Personal tax thresholds to increase in line with inflation from 2028
- Pensions and agricultural land to face inheritance tax
- Freeze on inheritance tax thresholds to be extended after 2028 to 2030
- Fuel duty frozen until 2028/2029
- VAT (20%) to be levied on private school fees
Property announcements
- Stamp duty surcharge on additional homes to increase from 3% to 5%. This also applies to those purchasing buy-to-let properties and purchases of residential property
- First-time buyers continue to benefit from stamp duty threshold of £425,000 (until next year when it falls to £300,000)
- Stamp duty threshold of £250,000 for home movers also remains in place
- Stamp Duty thresholds to be lowered
- Spending of £5bn on housing, including increasing the supply of affordable housing
- Local councils to retain the earnings from council housing sales to allow them to reinvest
Public spending
- £22.6bn increase in day to day NHS spending
- £3.1 increase to budget for NHS investment
- £6.7bn increase for education investment
Benefits, pensions and wages
- Significant reform to National Living Wage (those over 21) with a rise from £11.44 to £12.21 from April 2025
- Minimum wage will rise from £8.60 to £10 for 18-20 year olds
- Minimum wage for apprentices will increase from £6.40 to £7.55 per hour
- Increase of full-time earnings threshold for carers from £151 to £195 a week
- Benefits to rise to 1.7% – in line with inflation
- Increase in the state pension of 4.1% from April 2025
Justice spending
Finally, what may be of interest to many of our readers, the Chancellor also pledged spending on the justice system.
- Increase of £1.9bn on justice spending over the next two years
- Capital spending meanwhile will rise from £1.5bn in 2023-24 to £1.8bn this year and £2bn in 2025-26. This amounts to an average real-terms increase of 14.9% from 2023-24 to 2025-26
- No mention of civil and criminal legal aid
- £2.3bn of investment in prison expansion over 2024/2025 and 2025/2026, opening up thousands of prison places during this period
Our thoughts
These are just some of the announcements the Chancellor made in the 2024 Autumn Budget speech. While significant, it remains to be seen what the true impact will be on the UK economy. The Office for Budget Responsibility (OBR) has forecast that growth will be higher than expected in 2024 and 2025, before decreasing in 2026, 2027 and 2028.
Given the tax rises involved, businesses will be particularly concerned about what effect it will have on them. Nevertheless, the justification for this will be the need to primarily fund the NHS and the education system. As always, we will do our best to keep you updated on any further developments over the coming weeks and months.
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