The UK Autumn Budget 2024 marks a significant milestone as it is the Labour Government’s first budget since their return to power in the summer general election.
Rachel Reeves, the Chancellor, delivered opening remarks that set the tone for a budget focused on addressing economic challenges while striving for growth and sustainability.
However, the reception has been mixed, with many UK business owners, taxpayers, and citizens raising concerns about its implications.
Personal taxes
One of the most notable aspects of this year’s budget is the shift in personal taxes. The government has made changes aimed at increasing revenue by adjusting tax brackets and closing loopholes.
The government has announced an increase in the national living wage, which will increase to £12.21 per hour. This is a step towards addressing income inequality and supporting low-income households. There will also be a single-adult rate phased in over time to eventually equalise pay for under-21s.
Rachel Reeves assured that employees would not face direct increases in their contributions. Instead, employers’ national insurance contributions will rise by 1.2 percentage points to 15% starting from April 2025.
Additionally, the government plans to lower the secondary threshold for contributions, dropping from £9,100 to £5,000. These measures are projected to generate £25 billion annually by the end of the forecast period, making it the largest single tax-raising initiative in the current budget.
This approach aligns with the Chancellor’s strategy to fund essential public services and infrastructure without directly impacting employees’ take-home pay.
Taxpayers may want to check their income tax and national insurance contributions. It’s crucial for individuals to review these changes carefully.
Business taxes & employees
UK business owners have expressed dissatisfaction with the updates in business taxes. The budget introduces measures that could increase the tax burden, particularly for small to medium-sized enterprises.
The Government has announced they will introduce permanently lower business rates for retail, hospitality, and leisure businesses starting from the 2026-27 period. Until then, these sectors will benefit from a 40% relief on business rates, capped at £110,000. This provides some immediate support as they transition to the new rates.
In addition, the employment allowance will see an increase from £5,000 to £10,500, reducing the national insurance burden for smaller businesses, which is a positive move for encouraging growth and sustainability in this sector. This change is expected to generate an additional £25 billion annually.
However, taxes on carried interest, which are generally paid by private equity managers, will rise from 28% to 32% from April. This adjustment aims to align more closely with the overall direction of increasing taxable contributions from higher earners in the financial sector.
Meanwhile, the main rate of corporation tax, applicable to businesses on taxable profits over £250,000, will remain at 25% until the next election. These changes reflect the government’s ongoing efforts to reform the tax system and increase contributions from businesses and high earners.
Non-doms
Additionally, changes affecting non-domiciled residents might prompt some to consider relocating their business activities abroad. Business owners exploring this option should seek expert guidance to understand the implications fully.
The budget outlines forecasts for inflation and economic growth. While the government remains optimistic about long-term growth, the immediate picture painted by the figures suggests continued economic pressure. This outlook may influence decisions by businesses and investors regarding expansion and investment.
Capital gains & inheritance tax
The government has also targeted capital gains and inheritance taxes, aiming to raise funds through higher rates and reduced exemptions.
Specifically, the lower rate will increase from 10% to 18%, while the higher rate will move from 20% to 24%. Notably, there will be no changes to the existing 24% capital gains rate on second properties.
In the realm of inheritance tax, the government will continue freezing the threshold at £325,000, which can be passed on tax-free. However, reforms in reliefs on business and agricultural assets will generate an additional £2 billion in tax revenue.
Assets exceeding £1 million will now incur an inheritance tax rate of 20%. These measures signal a strategic push towards increasing fiscal contributions from higher-value asset holdings.
Individuals with substantial assets or those planning for inheritance must reassess their financial strategies to mitigate potential tax liabilities.
Other areas you may be interested in
Schools & education
Investments in schools and education are highlighted as a priority, with allocations aimed at enhancing educational infrastructure and resources. These investments are intended to foster long-term social and economic benefits.
NHS
The budget commits to additional funding to the NHS, emphasising improvements in healthcare delivery and reducing waiting times. While this is a positive step, the effectiveness of the funding in achieving these goals remains a topic of debate.
Housing, transport & energy
Infrastructure investments in housing, transport, and energy are aimed at addressing key public concerns. However, the scale and pace of these investments have been questioned by critics who argue they may not sufficiently address the pressing needs.
Public spending & investment
Public spending is set to increase, with plans for investments across various sectors. Yet, critics point out that while borrowing is extensive, the immediate impact on the day-to-day lives of UK citizens appears limited.
Government borrowing
With looser fiscal rules, there is a level of concern about the sustainability of increased government borrowing. The potential implications for future economic stability are significant and require careful consideration.
Closing remarks
In her closing remarks, Rachel Reeves emphasised the government’s commitment to building a fairer economy and improving living standards. However, the mixed reception indicates a divide between the government’s intentions and public perception.
While the budget proposes significant investments in key areas, there are concerns about the effectiveness and sustainability of these measures. Only time will tell if this budget will deliver on its promises and pave the way for a stronger UK economy.
Overall, it is clear that the country’s economic future remains uncertain, and careful monitoring and evaluation of government spending and investment decisions will be crucial in navigating towards long-term stability and growth.
Navigating the Autumn budget
For many, the budget brings questions and concerns about financial planning and tax optimisation. RHJ Accountants offer support to UK individuals, businesses, and sole traders in deciphering the complex implications of the Autumn Budget 2024. Our expertise can guide you in finding solutions to enhance your financial strategies amidst the evolving landscape.
Whether you’re considering business relocation, adjusting personal tax strategies, or understanding pension impacts from 2027 onwards, our team can provide the insights and solutions needed to make informed decisions.
For business owners, it’s essential to reassess your current tax structure and explore potential adjustments that could minimise your tax burden. RHJ Group can help evaluate the impact of increased business rates and national insurance contributions, and identify strategies to enhance financial health.
For individuals, reviewing your personal tax situation in light of the changes to income tax and inheritance tax is crucial.
Make sure to reach out, so our team can support you.
