Chancellor Rachel Reeves announced the first Budget by the new Labour government last week. While the minimum wage increase will be a boon to workers, large businesses may view the changes to National Insurance and other taxes as unwelcome impacts.
Introduction
Reeves’ rationale behind this strategy is to reverse the dire state of public finances and fill an alleged fiscal ‘black hole’ inherited from the previous Treasury.
The following are the highlights, but an in-depth summary is available to read and download in the PDF below. Please note that everything is subject to legislative approval.
Considerations for your organisation and employees
- Minimum wage – the National Living Wage for over-21s will increase by 6.7% to £12.21 per hour. The rate for 18 to 20-year-olds will increase to £10 per hour. Furthermore, a Single Adult Rate will be phased in over time to equalise pay for under-21s.
- Business rates – these will be permanently lowered for retail, hospitality, and leisure businesses from 2026-27. Until then, they will receive 40% relief on business rates up to a cap of £110,000.
- Support for small businesses – the British Business Bank will receive over £1bn across 2024-2026, including £250m each year for small business loan programmes.
- Over £200m has also been pledged for wider small business support – including continued funding for Growth Hubs and the Help to Grow Management scheme.
- Duties and levies – the freeze on Fuel Duty will be extended for another year while Draught Duty will be cut by 1.7%.
- Air Passenger Duty – from 2026, this will increase by £2 for short-haul economy flights and £12 for long-haul flights. The rates for private jets will rise by 50%.
Tax considerations
- National Insurance Contributions (NIC) – from April 2025, employer NIC will rise by 1.2% to 15%. The secondary threshold for employer NIC will be reduced from £9,100 to £5,000.
- Employment Allowance – this is an NIC exemption for smaller businesses and its threshold will increase to £10,500 (from £5,000).
- Pensions – basic and new state pension payments will rise by 4.1% next year. From 6 April 2024, scheme administrators of registered pension schemes must be UK residents.
- Inherited pensions – from 6 April 2027, unused pension funds and death benefits will be included in the deceased’s estate and liable to Inheritance Tax (IHT). Also, the distinction between discretionary and non-discretionary schemes will be removed.
- Agricultural Relief (AR) and Business Relief (BR) – from 6 April 2026, the 100% relief rate for the first £1m of combined agricultural and business property will continue. This will decrease to 50% thereafter.
- Note: the BR rate will reduce from 100% to 50% in all circumstances for shares that are “not listed” on recognised stock exchanges.
- Capital Gains Tax (CGT) – the main rate that applies to trustees and personal representatives will increase from 20% to 24% on disposals made on or after 30 October 2024.
- Carried interest taxes – generally, this is paid by private equity managers. It will rise from 28% to 32% from April 2025.
- Stamp Duty Land Tax (SDLT) – the single rate of Stamp Duty payable by companies and other non-natural persons purchasing dwellings over £500,000 will increase from 15% to 17%; effective from 31 October 2024.
Economic update
- The Office for Budget Responsibility (OBR) predicts economic growth of 1.1% this year, 2% next year, and 1.8% in 2026.
- Inflation is predicted to be 2.5% on average this year then 2.6% in 2025 before decreasing to 2.3% in 2026.
- The Autumn Budget’s policies will increase borrowing by £19.6bn this year followed by an average of £32.3bn over the next five years.
- The official definition of UK government debt has been loosened, however, to include a wider range of financial assets; for example, future student loan repayments.
Read our in-depth summary report
Sources
[1] Dalton, S. (2024) Autumn Statement 2024, threesixty.
[2] Jolly, J., Walker, P. (2024) Budget 2024: key points at a glance, The Guardian. Available at: https://www.theguardian.com/uk-news/2024/oct/30/budget-2024-key-points-at-a-glance (Accessed: 30 October 2024).
[3] Seddon, P. (2024) Budget 2024: Key points at a glance, BBC News. Available at: https://www.bbc.co.uk/news/articles/cdxl1zd07l1o (Accessed: 30 October 2024).
