Budget 2024 Summary: Everything You Need to Know

The Budget 2024 marks a pivotal moment for the UK, as it is the first budget delivered by the newly-elected Labour government, with Chancellor Rachel Reeves at the helm. As is often the case with the first budget of a new administration, this is more than just a set of financial measures – it is a statement of intent, laying the groundwork for the government’s priorities and values over the coming years. Reeves’ budget outlines significant tax increases, as well as new spending commitments aimed at bolstering public services and addressing economic challenges.

However, the true impact of these changes won’t be immediately clear. While the budget sets the direction for the country’s financial future, the success of these policies will only become evident in the months and years to come. Will the tax rises generate the desired revenue without stifling growth? Will the new spending deliver on promises to improve services and tackle inequality? As we delve into the key changes in Budget 2024, it remains to be seen whether the government’s strategy will meet its long-term objectives. The effectiveness of these policies will not only shape the public’s perception of this new government but also have lasting consequences for households and businesses across the country. Whether this budget strikes the right chord remains to be seen, but its success or failure will undoubtedly define the economic landscape for years to come.

Here is a summary of the key announcements:

Taxation

• Tax rises of around £40bn were announced. The aim is to use these tax receipts to rebuild public services and stabilise the public finances.
• Capital Gains Tax to increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers.
• Pensions to be brought into the scope of Inheritance Tax from 2027.
• Some IHT exemptions to be made less generous including relief for farmland and AIM shares.
• The Stamp Duty surcharge for additional properties will rise from 3% to 5% effectively immediately.
• It was confirmed that VAT will be introduced on private school fees from January.

Pensions & Investments

• No changes to ISA limits or tax advantages.
• No changes to pension contribution limits, pension tax-relief, tax on pension lump sums or withdrawals.
• Inheritance Tax to be applied to pensions from 2027.

State Benefits

• State Pension to rise by 4.1% next year in line with the ‘triple lock’.
• The minimum wage for over-21s to rise from £11.44 to £12.21 per hour with the rate for 18 to 20 year olds raised significantly from £8.60 to £10 per hour.
• Carers Allowance made more generous allowing carers to earn more without losing benefits.

Government Spending

• An additional £22.6bn for NHS spending plus a further £3.1bn for NHS investment projects and infrastructure.
• An additional £2.9bn for defence spending.
• Education investment to rise by £6.7bn with £1.4bn to rebuild over 500 schools.
• All government departments will have a 2% productivity, efficiency, and savings target.

Economy

• The Office for Budget Responsibility (OBR) forecasts the UK economy to grow by 1.1% this year, 2% next year, and 1.8% in 2026.
• The OBR forecasts inflation to average 2.5% this year, 2.6% next year, and 2.3% in 2026.
• The OBR expects public sector net borrowing to be £105.6bn next year before falling to £88.5bn then £72.2bn, £71.9bn and £70.6bn in 2029/30.
• Official forecasts show UK public finances will be in surplus by the 2027/28 financial year – reaching this target two years earlier than planned.
• The definition of government debt has been loosened to allow greater spending on capital projects such as infrastructure spending.

Business

• Employer National Insurance contributions to rise from 13.8% to 15% from April and National Insurance to start being paid on salaries above £5,000.
• Employment allowance to increase from £5,000 to £10,500, allowing employer to reduce their National Insurance liability.
• Tax on private equity profits to rise from up to 28% to up to 32% from April.
• Business rates relief to fall from 75%  to 45% for retail, leisure, and hospitality companies.

Duties & Levies

• A new tax on vaping products to be introduced from 2026.
• Tobacco duties to rise by 2% above inflation and 10% above inflation for hand-rolling tobacco.
• Tax on most alcoholic drinks to increase by RPI inflation, but tax on draught drinks to be cut by 1.7%.
• The 5p cut in Fuel Duty on petrol and diesel will be kept until at least 2026.
• Vehicle Excise Duty paid on most new petrol cars to double in their first year.
• Air Passenger Duty on private jets to rise by 50%.
• The levy on oil and gas company profits will be increased to 38% until March 2030.

Other Announcements

• £11.8bn set aside to pay compensations to victims of the infected blood scandal and a further £1.8bn allocated to pay wrongly prosecuted Post Office sub-postmasters.
• Additional £500 to boost the ‘Affordable Homes’ budget.
• Additional spending for the regions of the UK through an increase in devolution payments.
• The £2 cap on single bus fares in England will rise to £3 from January.
• An additional £500m to repair potholes in England.
• Free school breakfast clubs funding will be tripled to £30m plus an additional £300m for further education and £1bn for children with special educational needs (SEN).
• The ‘non-dom’ tax regime (for UK residents whose permanent home is outside of the country for tax purposes) will be abolished and replaced with a new residence-based scheme.
• Health and employment services for people who are disabled and long-term sick will receive an additional £240m.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.

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