As the leaves fall, the nights get darker and the chill of autumn sets in, the UK government has unveiled its Autumn Budget for 2024, presented by Chancellor Rachel Reeves. This budget marks a significant moment, being the first from a Labour government in over a decade.
With a focus on social equity, public services, and economic stability, the budget introduces a series of changes aimed at addressing the ongoing economic challenges faced by the nation. Here’s a summary of the Autumn Budget 2024 and what it means for you and your business.
Economic context
The UK economy is currently navigating high inflation rates, rising living costs, and the residual effects of the pandemic. The government’s fiscal strategies seek to encourage growth while managing public debt. According to the Office for Budget Responsibility (OBR), inflation is projected to decline gradually, yet the government remains focused on balancing spending and taxation to ensure economic stability.
Major announcements in the Autumn 2024 Budget
Income tax and national insurance changes
The budget maintains the freeze on income tax and National Insurance (NIC) thresholds until 2028. While many taxpayers may see wage increases, the lack of adjustments to tax thresholds could lead to a higher tax burden as incomes grow.
Increased national minimum wage
The minimum wage for younger workers will rise significantly; from £6.40 to £7.55 for ages 16-17 and from £8.60 to £10.00 for those aged 18-20. The National Living Wage (NLW) will increase to £12.21 per hour starting in April 2025. These changes reflect the government’s commitment to improving worker compensation amid rising living costs.
National insurance contributions
Beginning April 2025, employers will see an increase in Class 1 NICs from 13.8% to 15%. The threshold for these contributions will also drop from £9,100 to £5,000, which is expected to raise around £25 billion during the forecast period. We’re going to go into more detail about this in our next blog, so keep an eye out for that.
Energy profits levy
The Energy Profits Levy will rise from 35% to 38%, effective from November 1st, 2024. This levy targets profits from energy companies, with the investment allowance being adjusted and remaining in effect until March 2030.
Business rates reforms
A 40% business rates relief will be introduced for qualifying businesses in the retail, hospitality, and leisure sectors, capped at £110,000 for the fiscal year 2025-2026. However, relief for private schools will be phased out starting April 2025.
Inheritance tax changes
Starting April 2027, inherited pension pots will be subject to inheritance tax, removing the previous special treatment for pensions. This means that inherited pension wealth will now count toward the overall estate value for tax purposes.
Investment in public services
The budget allocates increased funding for vital public services, including £1.5 billion for the NHS to improve appointment accessibility and enhance capacity. Additionally, the justice system will receive more resources to address ongoing strains.
Focus on compliance and tax evasion
To tackle the tax gap, the government will invest in HMRC systems to enhance compliance and debt collection efforts, focusing on curbing tax avoidance schemes.
Implications for businesses and households
The Autumn Budget 2024 presents a mixed bag of implications for households and businesses. While the increases in the minimum wage and support for specific sectors may increase consumer spending, the higher tax rates and NIC increases could pose challenges for small businesses already grappling with rising operational costs. Households, particularly those in lower-income brackets, may benefit from wage increases but there will be a need to adapt to the new tax structures and potential changes in welfare provisions.
Need some extra help managing your business finances in the wake of the Autumn Budget 2024? Talk to our friendly team today, we’d love to help!