UK Autumn Budget 2024

What It Means for You and Your Business

The Autumn Budget 2024 brings notable shifts across taxation, public spending, and economic policies. Here’s a comprehensive look at the most critical updates.

Taxation Changes and New Fiscal Rules

Employer Rate Increase: From April 2025, the employer National Insurance contribution rate will increase from 13.8% to 15%. Additionally, the threshold for employer NICs will decrease to £5,000, affecting payrolls more significantly.

Employment Allowance: This allowance, which reduces NICs for eligible businesses, will increase to £10,500 annually, helping to offset the cost for smaller businesses.

Higher Rates: Effective immediately, the CGT rate has increased to 18% for lower-rate taxpayers and 24% for higher-rate taxpayers.

Business Asset Disposal Relief: The relief rate will rise in 2025, potentially impacting entrepreneurs planning to sell their business assets.

Inheritance on Pension Transfers: From April 2027, unused pension funds transferred upon death will be subject to inheritance tax.

Agricultural and Business Property Relief: While these properties currently enjoy full tax relief, a new cap of £1 million on 100% relief has been introduced, with additional assets taxed at 50%.

VAT Application: Education fees at private schools will now attract 20% VAT, and business rates charitable relief will be removed from April 2025.

VAT Application: Education fees at private schools will now attract 20% VAT, and business rates charitable relief will be removed from April 2025.

Public Spending and Investments

The budget allocates a significant portion of increased spending to healthcare and education, with Health and Social Care receiving a substantial increase to address backlogs and infrastructure needs.

Affordable Homes Programme: The government is committing an additional £500 million in 2025/26 to boost affordable housing stock across the UK.

Bus Fare Cap: Effective January 2025, the government will raise the bus fare cap from £2 to £3, intending to make public transport more accessible.

National Wealth Fund: The newly established fund will support green projects, from energy efficiency programs to sustainable infrastructure. Approximately £3.4 billion is allocated for household energy efficiency, decarbonization, and heating.

Economic Outlook and Growth Projections

The Office for Budget Responsibility (OBR) forecasts GDP growth to accelerate from 1.1% in 2024 to 2% in 2025. However, inflation is expected to persist longer than previously projected, peaking in the coming years before leveling off. These projections impact both fiscal policies and the public’s purchasing power, potentially affecting business operating costs and consumer demand.

Support for Households and Vulnerable Groups

Increased Earnings Limit: From 2025/26, carers can earn up to £196 per week (up from £151) while remaining eligible for the allowance.

Increase to £12.21: Starting April 2025, the National Living Wage will increase by 6.7%, affecting over 3 million workers. The wage for 18- to 20-year-olds will see a significant rise of 16.3% to £10 an hour.

Triple Lock Retained: The government remains committed to the triple lock for state pensions, ensuring an increase in line with earnings, inflation, or 2.5%, whichever is highest.

Changes in Eligibility: From 2024, the Winter Fuel Payment will be restricted to households on Pension Credit or other means-tested benefits, saving the government approximately £1.5 billion annually.

Anti-Fraud Measures and Welfare Reforms

New resources will be allocated to tackle welfare fraud and error across HMRC and DWP, including expanded debt recovery measures. The government expects these changes to save up to £3.5 billion by 2029/30.

Repayment Cap: A new “Fair Repayment Rate” will cap the amount deducted from Universal Credit payments for debt repayment at 15%, helping households retain more of their monthly benefits.

New Fiscal Rules

Budget Balance by 2029/30: The government aims to balance day-to-day spending with revenue, eliminating the need for borrowing to cover regular expenses by the end of the forecast period.

Debt Reduction: The target is to reduce public sector net financial liabilities relative to GDP by 2029/30, emphasizing long-term fiscal sustainability.

What’s Next?

These new fiscal targets reflect an emphasis on reducing reliance on borrowing, boosting revenue, and strengthening public services for long-term economic health.

The Budget debate continues in Parliament, with discussions on individual resolutions and a vote scheduled for November 6, 2024. The Finance Bill will follow, enacting these provisions into law.

How Can You Prepare?

Review Payroll: Prepare for the National Insurance increase, consider optimizing Employment Allowance, and assess the impact of the National Living Wage increase.

Plan Capital Gains: If you have significant assets, consult with a tax advisor to understand how the higher CGT rates may impact you.

Adjust for VAT on Private School Fees: This will affect any budgeting for private education expenses.

Update Inheritance Plans: If you have a pension that may be transferred to heirs, consider planning for the new IHT rules on pension transfers.

Energy and Home Improvement: Look into government programs available under the National Wealth Fund for energy efficiency support.

How Can You Prepare?

This Budget introduces several significant policy shifts. If you need help navigating these changes or understanding their impact, feel free to reach out to our team. We’re here to help you plan for a financially secure future.

The information provided in this blog is for general guidance only and should not be considered as professional advice. Tax laws and regulations are subject to change, and their application can vary depending on individual circumstances. For personalised advice tailored to your unique situation, we recommend consulting with a qualified accountant or reaching out to us at BM & Co. We're here to help ensure accuracy and compliance with UK tax regulations.