Chancellor Rachel Reeves announced the first Budget by the new Labour government last week. Her strategy focused on reversing the dire state of public finances and filling an alleged fiscal ‘black hole’ inherited from the previous Treasury.
Introduction
In contrast to former Chancellor Hunt’s vision, this Budget places an emphasis on public spending supported by increased taxes. Whilst most of the tax reforms will fall on businesses, individuals should be aware of changes to Inheritance Tax and Capital Gains Tax.
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.
Tax considerations
- Capital Gains Tax (CGT) – main rates will increase from 10% to 20% (lower) and 18% to 24% (higher) from October 2024. The rate that applies to trustees and personal representatives will increase from 20% to 24% on disposals made on or after 30 October 2024.
- Inheritance Tax (IHT) – the freeze on IHT thresholds has been extended to April 2030. As such, the nil-rate band will remain at £325,000, and the residence nil-rate band at £175,000 with the taper still starting at £2m.
- 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.
- Stamp Duty Land Tax (SDLT) – Stamp Duty on second properties is increasing from 3% to 5%; effective from 31 October 2024.
Other considerations
- Non-domicile status – from 6 April 2025, the non-domicile tax regime will be abolished; a new system based on residency will be put into place.
- Schools and education – VAT will be implemented on private school fees from January 2025. Furthermore, the Department for Education will receive £6.7bn in funding.
- 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%.
- Vehicle Excise Duty – will double for all but the most efficient new petrol cars in the first year of purchase.
- NHS – there will be a £22.6bn increase in the day-to-day health budget and £3.1bn increase in the capital budget.
- Housing – £5bn is set to be spent on increasing the housing supply and there will be a reduction in right-to-buy discounts.
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).
