On 30th October 2024, Chancellor of the Exchequer, Rachel Reeves, delivered the Government’s Autumn Budget. Reeves began her budget with a reminder of the mandate the government has set restore stability and start a decade of renewal. The only way to deliver growth is to “invest, invest, invest,” she said.
Economic growth
- The Office for Budget Responsibility (OBR) is publishing its own report regarding the non-disclosure spending pressure it faced at the last budget, and Reeves says she will implement all the recommendations from the OBR’s review.
- The OBR say inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.
- Real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029.
Business and investment
- The government will introduce permanently lower business rates 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.
- As part of their modern industrial strategy, the chancellor announced today nearly £1bn for the aerospace sector, over £2bn for the automotive sector and up to £520m for a new Life Sciences Innovative Manufacturing fund.
- The government will protect government investments in science research and development “to unlock these growth industries of the future” with more than £20bn of funding.
- The chancellor adds it will include at least £6.1bn to protect core research funding for areas like engineering, biotechnology and medical science.
- Taxes on carried interest, generally paid by private equity managers, will rise from 28% to 32% from April.
- The concept of non-domicile residents will be abolished from April.
Tax
- This budget is set to raise taxes by £40bn.
- National Insurance:
- National Insurance contributions by employers will rise from 13.8% to 15%.
- The threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5,000.
- The employment allowance will increase from £5,000 to £10,500, which the chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year.
- Income Tax:
- From 2028-29, personal tax thresholds will be uprated in line with inflation.
- Capital Gains Tax:
- The lower rate of Capital Gains Tax will rise from 10% to 18%, and the higher rate from 20% to 24%.
- There will be no increase on the 24% capital gains rate imposed on second properties.
- The government will extend a freeze on the threshold for inheritance tax, allowing £325,000 to be inherited tax free.
- There will be tax raises worth £2bn from reforming reliefs for business and agricultural assets. After £1m, those assets will attract inheritance tax of 20%.
- An increase the windfall tax on oil and gas profits to 38%, which will now expire in March 2030.
- The government will remove the 29% investment allowance, to ensure that oil and gas industry can protect jobs and support the UK’s energy security.
- Fuel duty freeze will continue next year, maintaining the existing 5p cut for another year, too.
- VAT will be brought in on private school fees in January 2025.
General
- National Living Wage for people aged 21 or older will rise by 6.7% from £11.44 an hour to £12.21 from next April.
- National Minimum Wage will rise for people aged between 18 and 20-years old from £8.60 to £10.
- There will be a 1.5% increase in real spending on government departments, and 1.7% when including capital spending.
- There will be £1.3bn for additional grant funding for local government, including £600m for social care.
- Greater Manchester and the West Midlands will get integrated settlements next year, allowing them to take more control of their spending.
To read the full budget document, click here.