On 30th October 2024, Chancellor Rachel Reeves delivered the UK government’s Budget, marking Labour’s first Budget since 2010.
Below we summarise the key points.
Taxation and Public Services
- Tax Increases: The Budget introduces tax hikes amounting to £40 billion to support the NHS and other public services. This includes raising the basic rate of capital gains tax (CGT) from 10% to 18%, and the higher rate from 20% to 24%. The CGT rate for trustees and personal representatives will also increase from 20% to 24%.
- Business Asset Disposal Relief: The lifetime limit for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) remains at £1 million, but the tax rate will rise from 10% to 14%, and eventually to 18% over the coming years.
- Inheritance Tax: The freeze on the inheritance tax threshold has been extended to 2030. Additionally, unspent pension pots will be subject to inheritance tax from 2027. The IHT Nil-Rate Band and Main Residence Nil-Rate Band remain at £325,000 and £175,000 per person, respectively.
Agricultural Property Relief (APR) & Business Relief (BR)
The government has pledged to support these reliefs by creating a new combined £1 million lifetime allowance for APR and BR investments in unquoted companies. This means up to £1 million of qualifying assets can be passed on free from inheritance tax. Above this allowance, assets will qualify for relief at a 50% rate, effectively reducing the IHT rate to 20%.
Above this lifetime allowance, assets will qualify for relief at a 50% rate uncapped (a 20% effective rate of IHT).
AIM shares will continue to benefit from relief from inheritance tax, but at a reduced rate of 50% (no matter the value of shares held).
These changes do not come into effect until April 2026. Until then, BR and APR continue to provide 100% relief from inheritance tax to an unlimited value. BR remains available provided shares have been held for at least two years at the time of death.
Business and Employment
- National Insurance: Companies will pay National Insurance at 15% on salaries above £5,000 from April, up from 13.8% on salaries above £9,100, raising an additional £25 billion a year for the Treasury. The Class 1A and Class 1B employer rates, which apply to taxable benefits-in-kind, will also increase in line with this. In partial compensation, the Employment Allowance will increase from £5,000, to £10,500 per year, meaning eligible employers can reduce their annual National Insurance contributions by up to £10,500.
- Minimum Wage: The legal minimum wage for over-21s will rise from £11.44 to £12.21 per hour from April.
Health and Social Care
- NHS & education: This year, day-to-day spending on the NHS and education in England will increase by 4.7% in real terms
- Carers’ Allowance: Eligibility for the allowance paid to full-time carers will be widened by increasing the maximum earnings threshold from £151 to £195 a week.
Economic Outlook
- Growth and Inflation: The Office for Budget Responsibility (OBR) predicts the UK economy will grow by 1.1% this year, 2% next year, and 1.8% in 2026.
- Chancellor’s Vision: Chancellor Rachel Reeves emphasised that the Budget is designed to restore economic stability and invest in future growth, with a particular focus on strengthening public services.
Overall, the UK Government’s 2024 Budget reflects the Labour party’s priorities—investing in public services while raising taxes to ensure long-term economic stability. The coming months will reveal the full impact of these measures on the economy and individuals.