The Chancellor of the Exchequer, Rachel Reeves, delivered her first Budget earlier today; an event that was momentous in several ways, not least for being the first Budget from a female Chancellor.
Summary of the Autumn Budget Announcements
The anticipated £40bn tax increase, while significant, came as little surprise due to prior media coverage. The budget announcements were contextualised by a review of the public finances left by the previous administration and the substantial deficit uncovered post-election in July.
As expected, the Chancellor outlined a substantial investment agenda, primarily targeting infrastructure projects in health, education, social housing, and transport. Describing this as the third time the Labour Party has needed to "rebuild Britain," the Chancellor emphasised the aim to “fix the foundations” by committing to substantial investment. Key spending will be financed in part by adjusted government borrowing rules, despite contrasting statements made while in opposition.
Key Budget Measures:
National Insurance Contributions
- The most substantial tax increase affects Employers' National Insurance Contributions, which will rise from 13.8% to 15% in April 2025. Additionally, the contribution threshold will decrease from £9,100 to £5,000.
- This increase, which was widely speculated on, has sparked debate about its impact on working people, potentially affecting salaries and leading to price increases as employers manage costs.
Inheritance and Capital Gains Taxes
- Capital Gains Tax (CGT) rates are set to increase: the higher rate will go from 20% to 24%, and the lower rate will rise from 10% to 18%.
- Business owners will appreciate the preservation of Business Asset Disposal Relief, maintaining a 10% tax rate on gains up to £1 million, although this will increase to 18%.
- Notably, carried interest CGT for fund managers will increase significantly, from April 2025, to 32%, with further changes in April 2026.
- Inheritance Tax (IHT) thresholds remain frozen, but major changes are coming for pension pots and Agricultural and Business Property Reliefs (APR and BPR) from April 2026.
Corporation Tax
- The government has pledged to cap corporation tax at 25%, with continued full expensing, a £1 million Annual Investment Allowance, and sustained R&D tax reliefs.
Income Tax
- No changes were made to income tax rates or thresholds, leading to fiscal drag until thresholds rise in April 2028.
Non-Domicile Tax Regime
- The UK’s non-domicile tax regime will end in April 2025, replaced by a temporary residence regime, affecting those with offshore trusts or non-UK property who may face higher IHT exposure.
Stamp Duty Land Tax
- From 31 October 2024, the surcharge on “second” properties will increase to 5%.
Tax Avoidance
- Continuing a long-standing focus, the Chancellor introduced measures against tax avoidance, including clampdowns on “umbrella companies” and promoters of tax schemes. HMRC will also receive funding to enhance efficiency, tackle non-compliance, and reduce late payments.
Closing Remarks
This budget represents a transformative agenda, introducing new tax rules, expanding borrowing, and investing in long-term growth. Success will hinge on whether these funds achieve the government’s aims of economic growth and improved quality of life for all citizens. Should these results materialise, criticisms of past “broken promises” could be mitigated.
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