Autumn Budget 2024: Key takeaways you need to know
By Boring Money
30 Oct, 2024
This year’s much anticipated - and for many, dreaded - Autumn Budget is finally here. Prime Minister Keir Starmer warned us ahead of time to "embrace the harsh light of fiscal reality", while the papers played their part by doling out a steady stream of shouty headlines about changes to tax and pensions.
So now that Chancellor Rachel Reeves has had her say and it’s all out in the open... what does it all mean? What’s actually changing? And how does any of it affect you? We’ve pulled together the main takeaways so you can walk away from the Budget armed with the knowledge of how it impacts your finances and if you need to take action.
Let’s dive in.
Budget reactions
This year’s Budget saw an unprecedented level of speculation as the nation waited with bated breath to see how the new Labour government planned to plug the reported £22bn “black hole” in public finances.[1] The media was treated to a seemingly endless drip-feed of leaks about exactly what would be in Chancellor Reeves’ red Budget box, while PM Starmer stirred up controversy with his disputable definition of “working people” whom he claimed would not bear the brunt of the pain.
All this chatter about the Budget, alongside other global and macroeconomic events, has had a clear impact on how Brits feel about their finances. In the last three months, sentiment has dipped, with 33% of investors saying they think the UK economy will get worse over the next 6 months.[2]
The Chancellor's Budget did indeed live up to fears of mammoth tax hikes, even if these are levied on employers, business owners, farmers and investors. With £40bn worth of increases, it arguably represents one of the most brutal Budgets in living memory and some elements - particularly the focus on employers and business owners - have been met with fierce criticism.
What do the experts say?
So what do the finance experts think of the Budget? We started by asking our Founder & CEO Holly Mackay to give us her immediate thoughts as Reeves rounded up her speech. Here's what she had to say in less than 60 words for the more impatient reader!
Bad for small business owners who like smoking roll-ups and drinking spirits on private planes whilst flying to a second home in a non-dommy country, shouting at their privately educated children, and chatting to an elderly parent who has left them an enormous pension in their will. But slightly less tough for those on the minimum wage, carers, and those worried about more Income Tax threshold freezes.
This was a substantial Budget, featuring £40 billion in tax increases, the largest since 1993, alongside major spending commitments and substantial additional borrowing. At its core, there was an increase in National Insurance contributions paid directly by employers, projected to generate £25 billion per annum, alongside billions more from changes to Capital Gains Tax, Inheritance Tax, VAT on private schools, and the Non-Dom tax regime.
While one may argue that Labour has delivered on its promise of change, one could equally see the rise in employer National Insurance contributions, coupled with a £40 billion total tax increase and around £30 billion in additional borrowing, as a significant shift from its manifesto.
I may have underestimated the government’s commitment to fiscal expansion, a valuable lesson learned. Many are now left wondering how these changes will impact their finances.
Inflation
First, let's talk inflation. According to the Office for Budget Responsibility's (OBR) Economic and Fiscal Outlook, inflation is forecast to sit at around 2.6% in 2025 and 2.3% in 2026. With interest rates already tipped to fall in November (and even possibly December), these sorts of levels should see rates stay lower than they have been in 2024. Which should ease the pain just a little for mortgage holders.
What do the experts say?
The mortgage market has seen bouts of huge volatility in the last 2 years so it’s encouraging for borrowers to see that rates are now in a much better place. Even though the base rate is more than twice its level prior to the mini-budget, mortgage rates are largely back to where they were. More importantly, the market has shown much more stability and is a world away from the skyrocketing rates post mini-budget, allowing homemovers and remortgage borrowers to look ahead with greater certainty.
Pensions
State Pension
Current rules:
At the moment, the government's Triple Lock guarantee stipulates the State Pension goes up each year by either 2.5%, inflation, or earnings growth - whichever is the highest figure. The current full new State Pension is £221.20 per week or £11,502.40 per year for the 2024-25 tax year.
What's changing?
The government has pledged to maintain the State Pension triple lock guarantee for the duration of this Parliament. The increase from April 2025 will be just over 4%, which was the average earnings growth in September. This means over 12 million pensioners will receive a boost of up to £475 on their State Pension payments, amounting to £230.30 per week or £12,016.75 per year.
When does it happen?
The State Pension increase will come into effect from the start of the new tax year on 6 April 2025.
Who does it impact?
This matters to retired people currently receiving their State Pension - or those who are about to from next year.
What do the experts say?
It's good news for pensioners who can look forward to a 4.1 per cent increase in their State Pension from next year. However, the rise will be largely wiped out by the government’s decision to restrict the Winter Fuel Payment to pensioners on Pension Credit. With fuel bills on the rise, the loss of up to £300 will be sorely felt and many face a tough winter ahead.
Inheritance Tax on pensions
Current rules:
As it stands, pensions are exempt from Inheritance Tax - meaning they don't count towards the value of your estate for IHT calculation purposes.
What's changing?
The government will remove the opportunity for individuals to use pensions to shield money from IHT, bringing unspent pots into the scope of this "most hated" tax. This will likely change the behaviour of how and when people access their pension as there is no longer the same obvious advantage of leaving this pot of money to last. This could all mean people start to use their pensions up earlier.
When does it happen?
Pensions will count towards estates for IHT purposes from the start of the 2027-28 tax year on 6 April 2027.
Who does it impact?
This will impact a relative minority of people. Only around 4% of estates currently pay IHT, and of these, only 8% are expected to be affected by the change.[3][4] That said, with frozen IHT thresholds until 2030, more people are starting to pay this tax and we anticipate more people will in future.
What do the experts say?
Reeves’ move to scrap the IHT exemption on unspent pension savings is bold, and will be a blow to savers who have beefed up their retirement pots to harness the estate-planning perks. Presumably this means that your pension pot will form part of your estate on death and unless your heir is a spouse or civil partner, they will pay 40% tax on anything that exceeds your tax-free allowances. This will reduce the allure of cascading pension pots down generations.
The Inheritance Tax exemption for pensions never made sense. Pensions offer tax relief so people can save for their retirement. It became a tool for wealthy people to reduce tax on their estates by living off other assets in later life.
Other than the IT announcement, the Budget said nothing about pensions. In the weeks leading up to the Budget, speculation about the removal of the tax-free lump sum reached almost hysterical levels. Advisers have reported a surge in calls from worried clients. Some people will now be worse off in retirement as a result of accessing their pension earlier than necessary against advice.
Tax
Employers' National Insurance
Current rules:
At the moment, UK employers pay a 13.8% National Insurance contribution (NIC) on employees' earnings above £175 a week. It’s a flat rate – so it does not increase or decrease after certain earnings thresholds – and is all dealt with automatically by HMRC before wages are paid out. The table below illustrates some examples of how much employer NICs cost:
Current Employee Pre-Tax Income | Current Employer NI Rate | Current Employer NI Contribution |
£20,000 | 13.8% | £1,504 |
£40,000 | 13.8% | £4,264 |
£60,000 | 13.8% | £7,024 |
Correct as at 2024-25 tax year
What’s changing?
In order to "repair public finances and help raise the revenue required to increase funding for public services", the Chancellor announced plans to increase the rate of employer NICs by 1.2 percentage points - taking them to 15%. The per-employee threshold at which employers start to pay NICs will also be significantly reduced from £9,100 per year to £5,000 per year.
This reduction in threshold was larger than anticipated and is a bitter pill for employers to swallow. An employer with an annual wage bill of £5,000,000 across 100 employees would currently have an employer NIC liability of approximately £564,000. From April 2025, employer NIC costs in this example will rise to approximately £664,500. The move is expected to generate £25bn for the government.[5]
When does it happen?
The changes to employer National Insurance contributions will come into force from 6 April 2025.
Who does it impact?
This will be a big hit to employers and small business owners. The extra cost for the average employee will likely range from around £650-£1,000, (clearly wage-dependant). But it will also inevitably impact employees, who may find the cost is indirectly passed on in more subtle ways, such as reduced budgets for salary increases, or indeed a lower headcount in the plan for 2025.
What do the experts say?
A lot of the discussion leading up to the Budget centred around what constitutes ‘working people’. Regardless of your definition, the Budget announcements are likely to impact every type of worker. In particular, the increase in NI for employers could also have a knock-on effect on wages offered by businesses and inflate the cost of the goods and services they offer to mitigate the heightened cost burden.
Capital Gains Tax
Current rules:
Presently, (CGT) is a tax which you pay to the UK government on the profit you make when you sell something that has increased in value. As of the 2024-25 tax year, every UK adult has a £3,000 CGT allowance – meaning you don’t have to pay anything unless your gains exceed this threshold. The rate of CGT you have to pay differs depending on your usual Income Tax band and what type of asset or investment you’re selling.
What’s changing?
A lot. The Budget increases the lower rate of Capital Gains Tax (CGT) for basic-rate taxpayers from 10% to 18% and for higher rate taxpayers from 20% to 24%. This impacts people who own shares, for example, or properties.
There is also a whammy for small business owners and entrepreneurs. CGT rates for Business Asset Disposal Relief (BADR) and Investors’ Relief will rise gradually from 10% today to 14% from 6 April 2025 up to 18% from 6 April 2026. This tax is typically levied after the first £1 million which is eligible for Business Asset Relief and can be deducted from any taxable gain.
There will also be an increase to CGT on carried interest (a performance-related reward received by fund managers) to 32% from April 2025.
Income Tax Band | Basic Rate - Current | Basic Rate - From April 2025 | Higher/Additional Rate - Current | Higher/Additional Rate - From April 2025 |
CGT on shares | 10% | 18% | 20% | 24% |
CGT on property (excl. main residence) | 18% | 18% | 24% | 24% |
Correct as at 2024-25 tax year
When does it happen?
The main rate of CGT is changing from 30 October (so that's immediately!). BADR and Investors' Relief changes, as well as CGT on carried interest, will come into effect from 6 April 2025. Wider reform to CGT on carried interest will commence from 6 April 2026.
Who does it impact?
The increased CGT rates (in combination with the lower threshold which kicked in earlier this year) will affect anyone selling shares in a non tax-efficient account - in other words, not in an ISA! They will also impact people selling second homes or rental properties, and those selling a business.
What do the experts say?
CGT has historically been charged at lower rates than Income Tax in order to reward investors for the considerable risks they take. So it was another sigh of relief from me as the CGT rate increase was much lower than the once-predicted 39 per cent! Whether this rate hike discourages investments is yet to be seen, but tax-efficient wrappers such as ISAs, pensions and investment bonds continue to provide you with plenty of tax planning tools.
The double whammy of swingeing cuts to the CGT allowance in April and the rise in CGT rates provides extra impetus for investors to do what they should already be doing: making the most of tax-efficient wrappers like ISAs and pensions, which shield gains and income generated from investments from tax.
Inheritance Tax
Current rules:
Existing Inheritance Tax (IHT) rules – notoriously complex! - allow for certain exemptions and reliefs. The main ones to look out for here are:
Agricultural relief - whereby farmers are able to claim exemption from IHT when transferring agricultural land as part of an inheritance.
Business property relief - whereby business owners can claim either 50% or 100% IHT relief to ensure that family-owned businesses can survive as a trading entity without having to be sold or broken up to pay IHT when an owner passes away.
You can read more about how this tricky tax currently works in our full guide here.
What’s changing?
For both agricultural and business property relief, the first £1m will continue to attract no Inheritance Tax, but assets over this threshold will attract IHT with 50% relief.
When does it happen?
These changes are due to kick in from 6 April 2026.
Who does it impact?
Primary individuals affected by this change are farmers and owners of agricultural land, as well as small businesses. Pensions have also been brought into inheritance tax too in a major change – as covered in the pensions section above.
What do the experts say?
One of the most overlooked tax changes in this Budget is the alteration to Inheritance Tax. While these changes are not anticipated to significantly boost revenue, they will have substantial implications for the families affected, many of whom have diligently saved and planned for future generations.
Non-Dom Status
Current rules:
Right now, a “non-dom" (non-domiciled) individual only pays UK tax on the money they earn in the UK.
What’s changing?
The government will abolish the non-dom tax status altogether and replace it with a "simpler and internationally competitive residence-based regime", where individuals who opt-in will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence. There will also be a new residence-based system for IHT, ending the use of offshore trusts to shelter assets from IHT, and the government will scrap the planned 50% reduction in foreign income subject to tax in the first year of the new regime.
When does it happen?
These changes will take effect from the start of the 2025-26 tax year on 6 April 2025.
Who does it impact?
This is a game-changer for anyone currently holding non-dom status.
What do the experts say?
It is promising to hear that there are some concessions, with the extension to the temporary repatriation facility, which will allow non-doms to bring their historic income and gains to the UK at a reduced rate of tax. We will need to see the detail to see whether this will be enough to satisfy those non-doms who had been considering leaving the UK ahead of the new rules coming into force.
Income Tax
Current rules:
As at the 2024-25 tax year, the standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on. Anything beyond this is subject to Income Tax, which is charged at different rates depending on which “band” you sit within. The existing Income Tax thresholds are:
Income Tax Band | Taxable Income | Income Tax Rate |
Personal Allowance | Up to £12,570 | 0% |
Basic Rate | £12,571 to £50,270 | 20% |
Higher Rate | £50,271 to £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
Correct as at 2024-25 tax year
What’s changing?
The government has committed to "not increase taxes on working people", which is why it's not increasing the basic, higher or additional rates of Income Tax. There will also be no increases to National Insurance contributions (NICs) or VAT.
When does it happen?
There is currently a freeze on these personal tax thresholds until April 2028. However, despite fears to the contrary, the Chancellor did not extend this, instead stating that thresholds will be uprated in line with inflation from the start of the 2028-29 tax year.
Who does it impact?
Frozen tax thresholds impact pretty much all of us and contribute to something called "fiscal drag", where the effect of inflation and rising wages pushes more people into higher tax brackets. This so-called "stealth tax" has serious impacts and so this will make a material difference to most employees, assuming this move is not reversed nearer the time.
What do the experts say?
It was clear leading up to the Budget that there was next to no scope to increase the Income Tax thresholds. However, it will be a relief to many to learn that from 2028-29, IT thresholds will start to increase in line with inflation again having been frozen since 2021. Since that time 4.4 million more people have started paying Income Tax and a further 2 million have started to pay higher rate tax.
While the announcement is welcome news, the freeze isn’t over yet, so we are likely to see more people being pulled into paying taxes at a higher rate. Taking advantage of tax-efficient pensions and ISAs, where appropriate, is one way of managing frozen tax thresholds. The current tax year ends in just over five months on 5 April 2025, which is the deadline to invest this year’s ISA and pension allowances to shelter your investments from tax on income and profits!
Business and Entrepreneurs
Business Asset Disposal Relief
Current rules:
Currently, business owners may be able to pay a lower rate of CGT when selling all or part of their business through something called Business Asset Disposal Relief. It reduces your tax bill to just 10% on gains on qualifying assets, although there are strict eligibility criteria.
What’s changing?
The Chancellor announced plans to increase Business Asset Disposal on sale from 10% to 14% in 2025 and then up to 18% the following year. Each entrepreneur has a lifetime allowance of up to £1 million which they can deduct from their profit, before calculating CGT on it.
When does it happen?
This will kick in from 6 April 2025 (the rise to 14%) and from 2026 (the rise to 18%).
Who does it impact?
This one will impact business owners looking to sell some or all of their company, increasing the amount of CGT you would have to pay on any gains realised from the sale.
What do the experts say?
Any Budget with increases to CGT and NI, gradual increases to BADR and taxes on investors going up is never easy and going forwards it will be hard for founders seeing taxes on their businesses rise.
Business Rates Relief
Current rules:
The current business rates relief system serves as a reduction on business rate bills for eligible businesses, such as retail and hospitality firms. The existing set-up was brought in under Covid and is set to run until April next year.
What’s changing?
For the 2025-26 tax year, eligible retail, hospitality and leisure (RHL) properties in England will receive 40% relief on their business rates liability, up to a cash cap of £110,000 per business. There was little else of significance mentioned beyond this, which has drummed up criticism from many business owners who have been campaigning for wider reforms to the business rates system.
When does it happen?
The RHL relief scheme will start from 6 April 2025.
Who does it impact?
The business rates relief changes are relevant to business owners in the retail, hospitality and leisure sectors.
What do the experts say?
Like the government before her, the Chancellor has failed to tackle the business rates issue. There has been no pledge for business rates reform across the board, no attempt to freeze the larger multiplier or to bring it to a sustainable level that businesses can afford, nor to tackle the business rates deserts we see in some parts of the country, nor to reform the creaking appeals system. Far from saving the high street, we have a potential disaster looming.
Other key takeaways
Carer’s Allowance
The government is also giving carers greater flexibility to work and increase their financial security by raising the Carer’s Allowance Weekly Earnings Limit to the equivalent of 16 hours at the National Living Wage. This is an increase of £45 per week and will allow over 60,000 more carers to access Carer’s Allowance.
What do the experts say?
This will make a noticeable difference for many, and for the first time in decades, carers will not lose out as the National Living Wage rises. It will help to put much-needed cash into the pockets of working carers who do so much to look after their disabled, ill and older relatives.
Stamp Duty
Stamp Duty Land Tax (SDLT) on second home purchases will increase by 2% from 31 October 2024, taking the overall rate from 3% to 5%. The Chancellor said this move is expected to result in "130,000 additional transactions over the next 5 years by first-time buyers and other people buying a primary residence".[12] Buy-To-Let (BTL) sales are already down to their lowest levels since 2016, accountancy firm Lubbock Fine reports, so the SDLT hike is expected to further compound the issue by making it that bit harder for landlords.[7]
What do the experts say?
Buy-To-Let landlords are already struggling – a two-thirds increase in Stamp Duty will hit them very hard. The good news is that landlords have not been hit by any increase in CGT. That’s a pleasant surprise for many. However, the risk for the government was that if they raised CGT on BTL too high then investors would just defer sales in the hope that CGT would eventually fall.
Fuel Duty
Fuel duty will be frozen at current levels for one year. The 5p cut will be extended for a further 12 months and the planned increase in line with inflation for 2025-26 will be cancelled.
What do the experts say?
Drivers will breathe an enormous sigh of relief after all the speculation that the 5p cut would be scrapped at the same time as pushing duty up beyond the long-term rate of 57.95p. It’s good to see the government firmly recognising the importance of the car to millions of households up and down the country. Eight-in-10 drivers tell us they are dependent on their vehicles for the journeys they need to make, while 70% of commuters who live in rural areas have no other feasible alternatives to get to work beyond taking the car.
Air Passenger Duty
The higher rate, which currently applies to larger private jets, will rise by a further 50% in 2026-27. From 2027-28 onwards, all rates will be uprated by forecast RPI and rounded to the nearest penny. Private jet passengers will be hit the hardest, with increases of £100s. Poor them!
Oil and Gas Windfall Tax
The Government will change the windfall tax on oil and gas and increase the rate by 3% to 38% and extend the time the levy applies until 31 March 2030.
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[1] Institute for Fiscal Studies, August 2024
[2] Boring Money, September 2024
[3] HMRC, July 2024
[4] Office for Budget Responsibility, October 2024
[5] Office for Budget Responsibility, October 2024
