The Autumn Budget 2024

The first labour Budget for 14 years!

The first Budget delivered by a woman by the first female Chancellor of the Exchequer. A great first for this country.

In essence an absolute 2-hour slanging match between those people that rule this country! Just watch the replay, instead of watching a panto this Christmas.

The Labour party were up until today always saying that they will reduce taxes in government, not a reflection of today’s Budget by any measure!

No mention that the government are increasing borrowing by £20bn this year and an average of £32.3bn over the next 5 years.

Tax increases will escape ‘workers’ or those that were the target of the Labour party at the last election but apart from numerous tax rises, the only tax reduction that was heard by the Houses of Parliament was a 1p reduction to cost of a draught beer!

The headline tax increase was an increase to Employer’s National Insurance Contributions from 13.8% to 15%. This is the only tax that directly affects those that employ and those that work! What are the chances that employers will pass that cost on to employees by way of a reduction in money spent on employment. Never trust a politician?

This Budget presents one of the biggest increases in taxation, spending and borrowing of any fiscal event in history. These are the words of the head of the Office of Budget Responsibility ‘OBR’.

Taxation will represent 38% of GDP as compared to 34% of GDP before the COVID-19 pandemic.

Servicing our national debt costs us £100bn a year!

Black Hole

A huge emphasis was put on the fact that the Chancellor has uncovered a £22bn black hole, within weeks of taking office. We have all heard about the local Council scandals where they are in numerous cases many years late, how is it that the new government credibly uncovered a £22bn difference???? The OBR held a press conference this afternoon and would not support the notion of the £22bn black hole, although they did say that there was information held by the Treasury in March 2024 that would have justified part of the £22bn being mentioned but that figure could not be quantified.

We all look forward in trepidation of the line-by-line details of hole from the Chancellor as promised.

Growth & Inflation

The OBR forecasts that the economy will grow by only 1.1 per cent this year, 2% in 2025 and 1.8% in 2026.

The OBR also forecasts that inflation will be 2.5% this year, 2.6% in 2025 and 2.3% in 2026.

Savings

Apparently, the Chancellor has already saved £5.5bn in July, however in the 1.5 hours of speaking she did not tell us how.

Some of the positives that came out of the Budget were that there will some new appointments, a Covid Corruption Commissioner a new Office for Value for Money.

The Chancellor does state that she will be demanding a 2% saving by each government dept.

The Chancellor also suggests that further savings will be achieved through a co-ordinated approach to reducing the benefits bill.

Minimum Wage

The national living wage will increase by 6.7%.

Headline Tax increases

National Insurance Contributions ‘NIC’

Employer’s NIC will increase from April next year from 13.8% to 15%, in addition the threshold at which Employer’s NIC is payable will reduce to £5,000. A significant increase in cost to carrying out business in the UK.

Capital Gains Tax ‘CGT’

With effect from today, CGT rates on the sales of shares and other assets increases from 20% to 24%. The lower rate of CGT of 10% increases to 18%.

Business Asset Disposal Relief ‘BADR’ with a limit of £1m of gain will be taxed at 10% for the rest of this financial year, this increases to 14% in 2025/26 and then to 18% from 6 April 2026.

Stamp Duty Land Tax ‘SDLT’

The 3% surcharge that currently applies to the purchase of second homes, buy to let residential properties, and companies purchasing residential properties goes up from 3% to 5% from 31 October 2024.

Inheritance Tax ‘IHT’

The Nil Rate Band of £325k, the level at which IHT is charged and the Residential Nil Rate Band of £175k remain frozen till 2030. Most of those affected might breathe a sigh of relief given some of the speculation that has been in the air over the past few days.

Pensions – Inherited pensions will from 2027 form part of the deceased estate at the point of death. Thus, pension pots remaining at death will suffer IHT at 40%.

Agricultural Property – Agricultural land and business worth more than £1m will be subject to IHT at 20% rather than 40%.

Non-Dom regime

This is to be scrapped in its entirety from April 2025, although much of this change was already announced by the last Chancellor.

Private Schools

The Chancellor has confirmed that VAT will be imposed on private school fees from January 2025. Furthermore, private schools will be subject to business rates from April 2025.

The OBR expects that this will raise £1.7bn vs the Chancellor who thinks this will raise £1.9bn. The OBR expects 35,000 less pupils in private schools in 5 years.

Fuel Duty

This will be frozen once again and the temporary cut of 5p be extended for another year.

Electric Vehicles

Tax incentives will continue, with the benefit-in-kind percentage rates increasing by 2% each year up to a cap of 9% in 2029-30.

Vehicle Excise Duty for petrol and diesel vehicles emitting more than 76 g/km will double in 2025-26.

Spending

This is about £70bn higher than last year, half of this is funded by the extra taxes, the balance will be funded from borrowing.

Schools

The core schools’ budgets will increase by £2.3bn next year, the further education budget will increase by £300m. There will be a tripling of the investment in breakfast clubs. £6.7bn will be provided for capital investment in education next year (a 19% increase), of this £1.4bn will be spent to rebuild RAAC impacted schools and £2.1bn for maintenance.

NHS

There will be a £22bn increase in the day-to-day budget and a £3.1bn rise in capital investment both this year and next year.

Defence

There will be a budget increase of £2.9bn next year.

Post Office and blood infection scandals

£11.8bn has been set aside to compensate those affected by the blood infection scandal.

£1.8bn has been set aside to compensate the victims of the Post Office Horizon scandal.

Summary

This was a very harsh Budget, one that substantially grows the size of government at a significant cost to business and workers.

The Chancellor as per the OBR has left herself the smallest amount of headroom (slack) they have seen from a Chancellor in a long time £10bn vs the usual c.£40bn. This leaves no room for an unforeseen expenditure.

We continue based on what the OBR has told us, to be borrowing between £20bn and £30bn each year, this has to be funded at some point!

The opposition states that this is a Chancellor that has decided to raise taxes of her own choice, not as a result of what she has inherited. The opposition point at the many pay rises that have been given in the last 4 months with no expectation of efficiency, with it being said that government departments remain significantly larger than pre-COVID levels with less output.

If you would like to discuss the changes and how they will affect you and your business, please contact us.