Budget 2024 – £40 billion in additional taxes

The chancellor, Rachel Reeves, has delivered the first labour budget in 14 years. The Government had already set the scene that they had inherited broken public finances and broken public services, so we knew tax increases were coming. The Chancellor started her speech by declaring the 2024 Autumn Budget would generate an additional £40bn in tax. The aim being to restore economic stability and increase investment in public services.

£40bn is a lot of extra tax, so where is it coming from? The Labour manifesto set out to protect working people, so there are no changes to employment taxes for employees. Instead, it is business owners, and particularly those that employ people that will take the brunt of it.

On a positive note, she announced that the OBR say CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029. This is significantly lower than the past few years, with a peak of 11% in 2022.

Key points at a glance

Clamping down on those not following the rules:

• Appointment of a Covid Corruption Commissioner, who will work with HMRC, the Serious Fraud Office and the National Crime Agency to investigate covid related fraud, with the aim to recover an estimated £7.6bn. This includes business loans and grants, incorrectly claimed furlough and abuse of Rishi Sunak’s flagship “eat out to help out” scheme.
• Increase the interest rate charged on unpaid tax.

Business taxes:

• Reeves announced yesterday that the National Living Wage for people aged 21 or older will rise by 6.7%, from £11.44 an hour to £12.21 from next April. The rate for 18-20 year olds will also increase by a staggering 16.3%, from £8.60 an hour to £10.00 an hour.
• Employers National insurance is to increase by 1.2%, from 13.8% to 15%. In addition, the point at which an employer has to pay this is going down from anything above £9,100 to anything above £5,000. The increases in Employers National insurance is predicted to generate £25bn in tax. Reeves says she is “asking businesses to contribute more” to help with the dire situation with the public finances.
• The small positive for employers is that the annual allowance, when an employer starts paying national insurance, is increasing from £5,000 to £10,000.

Capital gains taxes:

• Capital gains tax paid on profits from selling shares is set to increase from 20% to up to 24% for higher rate tax payers. The increase for basic rate taxpayers is from 10% to 18%. This is a smaller increase than many had feared.
• Business asset disposal relief will be maintained at £1m for those selling their business, but the rate will increase from 10% this year, to 14% next year and then 18% the year after.

Inheritance tax:

• The freeze on inheritance tax will continue for a further two years until 2030 (previously 2028). This means the first £325,000 can be inherited tax-free, rising to £500,000 if the estate is passed to direct descendants, and £1m if it’s passed to a surviving spouse or civil partner.
• From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m those assets will attract inheritance tax of 20%.

Electric Vehicle Incentives

• The Labour government wants to support the uptake of fully electric vehicles, and will maintain existing incentives for EVs in company car tax. However, it will increase the differential between fully electric and other vehicles beginning in April 2025. This will have the largest impact on hybrid vehicles.

Private schools

• As previously announced, VAT will be brought in on private school fees in January 2025.
• Their right to business rates relief will also be removed from April 2025.

Stamp duty

From tomorrow the stamp duty surcharge for second homes, or ‘higher rate for additional dwellings’, will increase by two percentage points to 5%. As this change comes in immediately, it will impact a lot of house purchases currently going through.

All the finer details of the fist Labour Budget can be found on the gov website

Get in touch

If you have any questions regarding the details in the Chancellor’s statement, please call the office on 01392 241228 or email Misty at misty@griffinaccountancy.co.uk.