Autumn Budget 2024 – Our summary and key highlights

The Chancellor, Rachel Reeves, delivered her first budget to the House of Commons this afternoon.

This Autumn Budget has been much anticipated, as not only is it Labour’s first for 14 years, but it has also garnered much speculation about what could be included and the impact it could have since it was announced back in July.

With suggestions of a £22bn ‘black hole’ in the public finances left by the previous government, and claims by the party that there would be ‘no return to austerity’, the rumours suggested that pensions, inheritance tax, Capital Gains Tax, and National Insurance were all to be on the government’s agenda.

Before the Budget, The Chancellor said, “the only way to drive economic growth is to invest, invest, invest” and that her aim is to create “an economy which is growing, creating wealth and opportunity for all”.

So, what is Labour’s plan to achieve this economy and what was covered in The Chancellor’s budget speech at the despatch box?

Getting started

After a slight delay with Chair of Ways and Means, Nus Ghani, giving a dressing down for early disclosures, the Chancellor kicked off her Budget, marking the occasion by confirming she was making history as the first female Chancellor of the Exchequer, something in which she was very proud of.

Setting out her key principles of restoring economic stability and increasing investment, Reeves confirmed that her Budget will increase taxes by £40 billion, adding she wants to put more money in people’s pockets.

She also confirmed that a breakdown of the £22bn ‘black hole’ that has been alluded, and argued about, will be published by the government ‘line-by-line’.  

New Fiscal Rules

Kick-starting the ‘invest, invest, invest’ spending, new, self-imposed targets for public finances – the fiscal rules – were announced by the Chancellor, replacing the existing ones which were inherited from the former Conservative government. This will allow the Chancellor to borrow more for investment spending, using a different measure of government debt.

Record changes to Minimum Wage

Ahead of the Budget, the Chancellor confirmed that the minimum wage will be increasing from April 2025. The biggest increase is for those aged under 21, with some reports calling it the largest on record.

It was announced that 18–20-year-olds on minimum wage will see a rise to £10 an hour, up from the current rate of £8.60, with a further confirmation that is the first step towards one rate of pay for all adults. For over 21s, the National Living Wage (formerly known as the minimum wage) will rise to £12.21, up from £11.44. Apprentices will also see a wage increase, moving from £6.40 to £7.55 an hour.

Inheritance Tax – Reliefs updated and thresholds frozen

Inheritance Tax (IHT) will see change, with predictions that this will impact exemptions on Business Property Relief and Agricultural Property Relief proving true. For both of these reliefs, there will still be an exemption for the first £1 million on combined assets, but for assets over this amount, the relief will be changed to 50%, adding an effective tax rate of 20%.

However, Reeves also confirmed that she will be freezing the IHT threshold for another two years, meaning it will continue until 2030. The first £325,000 of any estate can be inherited tax free, rising to £500,000 if it includes a residence passed to direct descendants, or £1 million if passed to a surviving spouse or civil partner.

Big changes to inherited pensions as part of IHT

It was also confirmed that inherited pensions would be moved into inheritance tax from April 2027.

Lower and Higher Rates of Capital Gains Tax see increases

No stranger to changes over the last few years, with the annual exemption changing in 2023 (from £12,300 to £6,000) and 2024 (from £6,000 to £3,000), it’s been widely expected that Capital Gains Tax (CGT) would be impacted by the budget, impacting those selling assets such as second homes or shares.

This was proved correct, with Reeves telling the House of Commons that the lower rate of CGT will increase to 18% (from 10%), with the higher rate increasing to 24% (from 20%). Reeves went onto say that rates for residential property will remain at the current rates of 18% and 24%.

The increase in the main rates of CGT will apply to disposals made on or after 30 October 2024, whereas the rate that applies to Business Asset Disposal Relief and Investors Relief will increase from 10% to 14% in April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.

As well as this, an increase to 32% on carried interest will begin from April 2025 and 2026, delivering further reforms.

A change to National Insurance Contributions for employers

National Insurance has featured a lot over the last couple of budgets with the main rate of Employee NIC (National Insurance Contributions) decreasing to 10% (Autumn Budget 2023) and then 8% (Spring Budget 2024).

Labour had already ruled out a change to NI for employees in its manifesto and Reeves confirmed this as part of her speech, for the time being. Instead, she has chosen to keep the freeze on income tax and NI thresholds for working people, however, this will be uprated in line with inflation from 2028-29.

It was expected that this freeze wouldn’t stretch to employers, who pay NIC for most workers earning more than £9,100, or the equivalent of 13.8% of the employee’s earnings above that threshold, but not on payments they make to the employees’ pension pots.

In the budget, it was announced that Employer NIC would rise to 15% (an increase of 1.2%) in April 2025, along with the threshold dropping to £5,000. She expects this to raise £25bn a year over the forecast period.

The Chancellor went onto say that she understands the impact this will have on small businesses, so the Employment Allowance will increase to £10,500, meaning that over 800k employers won’t pay any NIC next year, and another million will pay the same or less as they have done before the change.

VAT on School fees confirmed for January 2025

As announced early on in her role as the Chancellor, the VAT exemption for private school fees will be removed.

VAT at the standard rate will now be added to private school fees from 1 January 2025. Any pre-payments made from 29 July 2024 will also be subject to this tax, to ensure that parents aiming to avoid the extra fees through early payments, will also be subject to the VAT change.

Reeves also confirmed that the Business Rates Relief will also be removed. Both measures are expected to raise £9bn by the end of the forecast.

Abolishing the non-dom status

Reeves confirmed that the ‘outdated concept’ of the non-dom tax regime will be removed from the tax system from April 2025. A new, residence-based scheme will take its place, with “internationally competitive arrangements” for those coming to the UK on a temporary basis.

Protecting the high streets

Reeves confirmed that struggling high streets will receive a boost with retail, hospitality and leisure properties receiving 40% business rate relief, up to a cap of £110,000 per business. From 2026-27, two lower rates will be permanently introduced for this sector too.

Additional Measures

Housing

Stamp Duty Land Tax (SDLT) for those with second homes will be increased from 3% to 5% from tomorrow, Thursday 31 October.

SDLT payable by companies and other non-natural persons on the purchase of residential properties worth more than £500,000 will also increase from 15% to 17%.

It was confirmed that £5 billion will be spent on housing to allow for more affordable homes to be created, as well as new planning officers hired to accelerate this house building capability. £3.4bn was also promised for the Warm Homes plan to upgrade buildings and help lower energy bills.

Positive news for drivers

There was much expectation that the Chancellor would remove the cut to fuel duty, something highlighted by the RAC as not actually beneficial for drivers. However, she confirmed that fuel duty would remain frozen for the next two years.

Reeves also touched on the investment in the nation being noticeable by the state of the country’s roads. She promised an increase to road maintenance next year, worth £500 million, with a commitment to fix an additional one million potholes.  

Incentives stay for Electric Vehicles and company cars

Fuel duty wasn’t the only car-related item expected to change, with electric vehicles and car tax being a fixture of some predictions. However, in the Budget, it was confirmed that incentives for EVs in company car tax will remain until 2028. From April 2025, the differential between fully electric and other vehicles will be increased in the first rates of Vehicle Excise Duty.

A penny off your pint

Alcohol duty is always a popular one and was met with its usual cheers when Reeves confirmed she will be cutting the duty on draught beer, effectively giving pub goers an extra 1p off their pint.

It wasn’t all good news on this front though as alcohol duty rates on non-draught products will increase in line with RPI from February next year.

Don’t miss our full Autumn Budget report

As always, our experts will be going through the announcement in detail and our in-depth Autumn Budget report will be available tomorrow, which sets out everything that was introduced by The Chancellor