On October 30, 2024, Chancellor Rachel Reeves announced the government’s Autumn Budget, which outlines financial plans for the next five years.
The government aims to raise over £40 billion through new tax measures to fill a £22 billion gap in public finances. The goal is to restore economic stability and help people keep more money.
Reeves stressed that the government will not borrow money to pay for current expenses and is dedicated to keeping the Bank of England’s inflation target at 2%. She said, “Our task is to fix the foundations of our economy and deliver change through responsible leadership in the national interest. I know we can achieve it.”
So, what does this mean for you? Let’s look at who will benefit and who might face difficulties from these new measures.
Who Stands to Gain
The NHS
Good news for healthcare: The NHS will get a major funding increase. The government is raising the NHS budget by £22.6 billion for everyday operations and adding an extra £3.1 billion for capital projects over the next two years. Reeves said this is the largest real-term increase in NHS spending outside of COVID since 2010.
Green Energy and Sustainable Transport
The government is investing a lot of money in green projects. The National Wealth Fund will support important areas like electric vehicle factories and green hydrogen plants across the country. Additionally, over £2 billion will help the automotive industry switch to electric vehicles.
Property Developers
The government is working to solve the housing shortage. Funding for the Affordable Homes Programme will go up to £3.1 billion, which supports Labour’s promise to build over 1.5 million homes. They plan to hire hundreds of new planning officers and lower Right to Buy discounts. This will give local councils more financial power. These changes could encourage investment in the property market and make it easier for developers to build new homes.
Drivers
If you’re a driver, there’s good news at the pumps. The freeze on fuel duty will last another year, which could save you about £60 each year. This decision costs the government £3 billion a year, but it aims to help drivers, including delivery drivers and supply chains.
Young and Low-Income Workers
Wages are increasing. The National Living Wage for workers aged 21 and over will rise by 6.7% to £12.21 an hour. This could mean an extra £1,400 per year for full-time workers. For 18–20-year-olds, the National Minimum Wage will jump by 16.3% to £10 an hour. Also, National Insurance rates will not increase for workers. These changes aim to help those with lower incomes.
Small Businesses
Good news for small businesses: the employment allowance will increase from £5,000 to £10,500. This change will lower the National Insurance costs for small businesses. As a result, around 865,000 businesses will not have to pay any National Insurance in 2025. This will help them keep their current employees and attract new ones without hurting their profits.
Who Might Lose Out
Employers
Employers will pay more taxes starting in April 2025. The National Insurance contributions for employers will rise to 15%. Additionally, the point at which employers begin to pay National Insurance will lower from £9,100 to £5,000 a year. These changes may impact employees. If businesses face higher National Insurance costs, they might reduce benefits like pension contributions or other perks.
Retirees and Beneficiaries
Important changes are coming to pension death benefits. Starting April 6, 2027, any leftover pension money when someone dies will be taxed as Inheritance Tax. If you plan to use your pension to pass on wealth to your family, they may receive less than you expected.
Owners of Agricultural and Business Assets
Starting April 6, 2026, changes will be made to Inheritance Tax relief for agricultural and business assets. The first £1 million of qualifying assets will still receive 100% relief, but anything above that will only get 50% relief. This change may affect families trying to pass down farms or businesses to the next generation.
Also, the relief for holding unlisted shares or AIM shares will decrease from 100% to 50% for transfers made on or after April 6, 2026. Previously, if you held these shares for at least two years, they were fully exempt from Inheritance Tax when you passed away. Now, half of their value will count towards your estate.
New Businesses and Investors
Capital Gains Tax (CGT) rates are increasing. The lower rate will rise from 10% to 18%, and the higher rate from 20% to 24%. While Reeves noted that the UK will still have the lowest CGT rate among European G7 economies, some experts worry this could discourage investment in UK startups and potentially reduce overall tax revenue.
Foreign Investors
Big changes are coming for high-net-worth individuals who are not UK residents. The government will end the non-domiciled tax system starting in April 2025. This change will remove the idea of domicile from the tax rules. Additionally, they are extending the Temporary Repatriation Relief for three years. This move aims to bring billions of pounds into the UK and is expected to generate £12.7 billion over the next five years.
Second Homeowners
If you own a second home, pay attention: starting October 31, 2024, the Stamp Duty Land Tax for extra properties will go up to 5%. This change aims to help over 130,000 people buy their first home or move over the next five years. However, this could affect landlords, property developers, and owners of holiday or rental homes.
Private Schools
Starting January 1, 2025, private schools must charge a 20% VAT on education, training, and boarding services. They will also not be able to get back VAT on their expenses. This may result in higher fees for private education.
