Autumn Budget 2024

Key Changes and What They Mean for You

On the 30th October 2024, Chancellor Rachel Reeves’ Autumn Budget introduces substantial tax, wage, and public service funding changes. This guide highlights the main adjustments affecting individuals, families, and businesses across the UK.

National Insurance and Employer Costs

• Employer NIC Increase: From April 2025, employers will see National Insurance Contributions (NIC) increase by 1.2 percentage points to 15%. The earnings threshold for employer NICs will reduce from £9,100 to £5,000, with these changes projected to raise £25 billion annually.
• Small Business Support: To ease this increase, the Employment Allowance will double from £5,000 to £10,500, exempting around 65,000 employers from NICs starting in April 2025.

Capital Gains Tax Adjustments

• Rate Increases: Effective 6 April 2025, the lower Capital Gains Tax (CGT) rate will increase from 10% to 18%, while the higher rate will go from 20% to 24%. CGT on residential property will also rise to 24%, ensuring higher-value transactions contribute more.
  Inheritance Tax Reforms
• Threshold Freeze and Loophole Closures: The inheritance tax (IHT) threshold remains frozen at £325,000 until 2030. From April 2025, assets above £1 million in agricultural and business reliefs will now attract a 20% inheritance tax.- Pension and Relief Adjustments: From April 2025, unspent pension pots will become subject to inheritance tax. Additionally, agricultural and business property reliefs for the wealthiest estates will be scaled back.

Minimum Wage Increase

• The National Living Wage for those aged 21 and over will increase by 6.7% to £12.21 per hour from April 2025. This represents an additional £1,400 annually for full-time workers. Workers aged 18-20 will see a rise to £10 per hour, a 16.3% increase.

Fuel, Alcohol, and Tobacco Duties

• Fuel Duty Freeze: The government will extend the current 5p fuel duty cut and freeze increases through to April 2026 to support household budgets.
• Alcohol and Tobacco: From February 2025, alcohol duties will see a 1.7% cut on draught products, lowering the price of a pint by about 1p. Tobacco duties, however, will increase at inflation plus an additional 2%, with a 10% surcharge on rolling tobacco.

Education and Childcare Investments

• Private School Fees: VAT will apply to private school fees beginning January 2025, expected to raise £1.6 billion to support the recruitment of 6,500 new teachers for state schools.
• School and Higher Education Funding: The Department for Education will receive a funding boost in April 2025. This includes £1.4 billion for rebuilding schools, £2.3 billion for teacher recruitment, and £1 billion to support special educational needs.

Affordable Housing and Infrastructure Investments

• Housing Projects: The government’s commitment of £5 billion towards affordable housing, council housing expansion, and cladding removal is effective from April 2025.
• Transport Improvements: Major Northern rail routes, including the Transpennine Route and the Oxford-Cambridge corridor, will see upgrades. Additionally, HS2’s connection to London Euston will progress, with £500 million earmarked to repair potholes and improve road quality.

Environmental and Energy Initiatives

• Warm Homes Plan: Starting 2025, the government has allocated £3.4 billion to the Warm Homes Plan, which supports energy-efficient upgrades to homes, lowering household bills and promoting sustainability.
• Green Energy Support: Establishing Great British Energy in Aberdeen, the government aims to boost renewable energy projects, supporting its ambition for the UK to lead in clean energy.

Stamp Duty Land Tax Hike for Second Properties

• Increase: From 31 October 2024, Stamp Duty Land Tax (SDLT) on second homes, buy-to-let properties, and additional residential properties will increase by 2%, raising the surcharge from 3% to 5%. This adjustment aims to make additional revenue from higher-value property transactions. The government intends this hike to support housing affordability by reducing competition for first-time buyers, ensuring they face less competition from investment buyers.
• The single rate of SDLT charged on the purchase of dwellings costing more than £500,000 by corporate bodies will be increased by 2% from 15% to 17%.

Furnished Holiday Lets

• It was confirmed that the Furnished Holiday Lets tax regime would be abolished as previously announced.

Abolition of Non-Dom regime

• From 6 April 2025, the current rules for the taxation of non-UK domiciled individuals will end.
• The concept of domicile as a relevant connecting factor in the UK tax system will be replaced by a system based on tax residence.
• This includes ending the use of offshore trusts to shelter assets from Inheritance Tax and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime.
• Individuals who opt into the new residence-based regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.
• The protection from tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for this four-year FIG regime.
• Introduction of Temporary Repatriation Facility to allow individuals previously taxed on the remittance basis to designate amounts derived from pre-6 April 2025 foreign income and gains, and pay a reduced tax rate for a period of three tax years, starting from 2025 to 2026.
• For CGT purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 in some circumstances.

Savings and ISAs

• The Starting Rate for Savings will be retained at £5,000 for 2025-26, allowing individuals with less than £17,570 in employment or pensions income to receive up to £5,000 of savings income tax-free.
• Digital reporting for Individual Savings Account (ISA) managers will be mandatory from 6 April 2027.
• Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.
• The previous proposals to introduce a British ISA will be dropped.

This budget signals a strong focus on equitable taxation, providing reliefs for working families and small businesses, while seeking fairer contributions from wealthier individuals and high-value transactions. These changes reflect the government’s commitment to revitalising public services, enhancing social equity, and promoting long-term sustainability across the UK.