Your guide to the Autumn Budget 2024: How does it impact you?

By October 31, 2024Client Zone, News

On Wednesday 30th October 2024, Chancellor Rachel Reeves unveiled the first Labour Budget in nearly 15 years, and it’s certainly landed with a bang. 

To help you understand the impacts of the Budget – and how it might directly impact you – we’ve assembled a range of resources. It’s crucial to remember that as with any major financial announcement, the detail often continues to emerge in the following days. That’s why we’re hosting a Budget Q&A webinar event on 6 November, where we’ll provide a little more detail and give you a chance to ask questions directly to our financial planners.

In this section: Jump to:

CEO Mike Marigold’s overview of the 2024 Budget >

Top-level headlines >

Autumn Budget 2024: Our detailed analysis >

Register for our Budget Q&A on 6 November >

Can’t wait? Book a chat with an adviser today >

Overview of the 2024 Budget from CEO Mike Marigold

TLDR (Too Long, Didn’t Read): Top-level headlines

  • The focus was a headline figure of £40bn in tax rises has been announced, to fill a ‘£40bn fiscal black hole’
  • A further key aim was to raise enough money to give public infrastructure and services a (some would argue) much-needed boost
  • The consensus amongst economists is that Rachel Reeves faced an unenviable challenge to find the right balance between taxation, borrowing and public investment
  • Whilst the majority of people will not be directly impacted by the Chancellor’s announcements, they will inevitably be indirectly impacted as Reeves took aim at businesses
  • The people that will be most affected by this round of tax changes are business owners and those wanting to leave a legacy for their loved ones

The Detail

Personal

  • From 6th April 2025, Minimum Wage across the board will be increased above inflation and be closer aligned to the Living Wage
    • This is good news for lower income earners
    • It is an additional burden for businesses, especially those in the struggling hospitality and retail sector who have been hit harder by inflation than other sectors
  • As Labour announced before the budget, there were no increases to Income Tax or National Insurance for employed or self-employed people

MC’s view: Labour really painted themselves into a corner on this one (helped along by similar Conservative pledges), meaning businesses are picking up the slack here

  • As expected, tax brackets are not increasing in line with inflation. This is called “Fiscal Drag”. The Conservatives had frozen these brackets until April 2028. Labour has pledged to unfreeze the brackets from April 2028 onwards
    • In plain English, as your income rises with inflation, more of it will fall into higher tax brackets and you will pay more in tax
    • There are ways to reduce the amount you pay in tax, whilst also investing in your future. Speaking to a professional will help you unlock those opportunities
  • The Big One! As highly expected, VAT at 20% will apply to private school fees from January 2025. This is a significant increase in costs on top of above-inflation increases in school fees averaged over the last 10 years

MC’s view: We recently wrote an article on how to navigate VAT on school fees. If you want to privately educate your children and/or grandchildren, specific financial planning for the future is imperative, now more than ever, to ensure you have enough, when you need it. Relying on funding fees from surplus income will no longer be sufficient for a number of families

  • The infamous ‘non-domiciled’ regime will be abolished – this was originally a Conservative policy announced in previous budgets that Labour whole-heartedly supported and have promised to see through. People will instead pay tax based on being UK resident. There were suggestions in the run-up to the budget that the existing regime would be too complex to unravel and the whole plan would be scrapped, but those rumours appear to be unfounded

Businesses

  • The Big One! As had been leaked prior to the budget, Reeves announced increases to the level of National Insurance that employers have to pay – increasing from 13.8% to 15%, from April 2025
  • Not only that, but the point at which employers start paying this has reduced down from £9,100 pa to £5,000 pa
    • The change on that portion alone will amount to an increase of £615 per employee, per year
  • This is predicted to raise up to £24bn per year alone
  • There is some relief for businesses though, in terms of the Employment Allowance, which up until now applied to businesses that pay less than £100,000 National Insurance in the previous tax year
    • Businesses will receive a reduction of up to £10,500 in their National Insurance bill – an increase from the previous £5,000 relief
    • And the £100,000 cap is being removed, meaning some small businesses could actually be better off under the new rules than before

MC’s view: One of Labour’s manifesto pledges was to get the British economy growing again and this is where we feel they are missing a beat. Increased costs on businesses mean they are likely to think twice when hiring and considering bonuses and pay rises, which obviously has a knock-on impact on money in people’s pockets and therefore spending, growth and ultimately HMRC’s tax-take

  • We believe Labour would have been better reversing the NI decrease that employees benefitted from only a few months previously, given most people were used to paying the higher level anyway
  • This move will however help to keep inflation down
  • Depending on how businesses are valued, the increase in National Insurance (if treated as a pure employment cost) could ultimately reduce the value of your business, when you look to sell
  • Two key actions you can take to mitigate the impact as a business owner are:
    • Review your salary / dividend split for your own pay structure
    • Utilise salary sacrifice for employee pension contributions

Investments

  • Stamp Duty on second homes is increasing again – there was already a 3% additional hit on normal Stamp Duty rates when buying additional property. From 30th October 2024 this has increased to 5%

MC’s view: Investing in property has become less and less attractive over the years as successive governments have aimed to free up stock for first time buyers. We have been advising our clients to reduce their reliance on buy-to-let portfolios for a number of years now and will continue to do so, as this investment class is likely to continue to be hammered from a tax perspective, going forwards

  • Capital Gains Tax is increasing… Not really news in and of itself as a number of commentators expected rates to be pushed up in line with income tax rates. They have not gone up as much as that but they are now aligned to the second property rates of 18% (up from 10%) and 24% (up from 20%) from 30th October 2024

MC’s view: One could argue this helps to simplify things, using the same rates as property. However we believe this discourages investment – the reason CGT rates are lower than income tax rates is because of the risk of investing. It also discourages entrepreneurs if they know they have to pay a large “exit penalty” for building a business and employing people along the way

  • More and more everyday investors will already be facing CGT bills, having had their annual allowances cut in successive years down to £3,000 and now those bills will be higher, especially as more taxable profits will push more people into the higher bracket for CGT
  • Business owners will still benefit from the £1m lifetime Business Asset Disposal Relief, which means you will pay the lower CGT rate (10% up until now) on the first £1m of profits when selling a business
    • However this CGT rate is also increasing from 10% to 14% in April 2025 and will go up again to the new 18% lower CGT rate, from April 2026
    • On a sale generating £2m of profit, this would eventually represent an increase of £80,000 extra in Capital Gains Tax

MC’s view: Getting your business ownership structure right is crucial. Also alternative exit options, such as Employee Ownership Trusts are now looking far more attractive. If you are looking to exit your business, sooner rather than later could be more tax advantageous

  • Inheritance Tax Relievable investments, such as businesses, AIM Shares, EIS and Business Property Relief Plans are losing some of their relief (more on that below)

Inheritance Tax & Estate Management

  • Nil rate bands have been frozen since 2009 and under the Conservatives were due to remain so until 2028. Labour has extended this freeze for another 2 years until April 2030
    • Due to Fiscal Drag, more of your estate will face inheritance tax unless you take action
  • There are some significant changes to the inheritance tax regime that require a deeper dive. Prior to the budget Montgomery Charles were one of the only commentators suggesting there may be a lifetime cap on Inheritance Tax allowances coming. Without wanting to succumb to hubris, we suggested Reeves may consider a slightly out of left field change – a cap on lifetime gifts. She didn’t…
  • Instead, completely out of left field, it was announced there would be a combined lifetime cap on Business Property Relief and Agricultural Property Relief of £1m from April 2026. We imagine this is to align to the £1m lifetime cap on Business Asset Disposal Relief. Value above this level will receive 50% relief of the 40% IHT rate (i.e. value in excess of the cap will face an effective rate of 20% IHT).

MC’s view: This is bad all round! As it stands today, if you are a business owner and you die, then your children can inherit your business, completely free of any inheritance tax. This is to ensure that businesses do not have to be sold and broken up to pay very large IHT bills and ensures that the backbone of Britain – our small businesses, will continue to run, support the economy and employ people. This change throws all of that into question and can create a very uncertain future, both at a personal level and at an economic level

    • This makes legacy planning, both personally and at a business level, imperative. Now is the time to consider restructuring businesses in terms of who owns what shares
    • Equally important is ensuring you have shareholder protection in place, to ensure any IHT liabilities can be met and the business can continue in the event of an untimely death – especially where you have more than one shareholder
  • For the complex situations we often deal with, where Business Property Relief and Trusts intersect, there will now be lifetime limits on Trusts of £1m where BPR is being used, meaning 10 year periodic and exit charges could now come into scope
  • In addition to this change – AIM Shares will no longer benefit from the full 100% Business Property Relief and will instead only receive 50% relief. Other IHT-relievable investments may also be dragged into this stricter regime as more detail emerges over the coming weeks
  • Another Big One! Hidden in the detail on page 52 of the 168 page budget report, it has been announced that Labour will look to bring “unspent pensions” into the scope of Inheritance Tax from April 2027

MC’s view: In our recent articles we suggested this could be a key target and unfortunately it looks like we were right. In our view, this is inheritance tax by stealth, given many people will have planned their inheritance tax situation using pensions over the years and are now unable to reverse those decisions, without facing very high levels of income tax. It is going to require a lot of industry consultation on how to apply this and whether there will be any protections on planning that has already been carried out, as well as what “unspent” means – this could apply to all pension funds or just ‘uncrystallised’ funds. It may also have an impact on lump sum death benefits received under defined benefit schemes like the NHS pension

  • Given the additional layers of complexity these changes bring, if you want to leave a legacy to your loved ones, now more than ever is the time to seek expert advice

The Fun Things!

  • Alcohol duty will increase in line with inflation, with the exception of draught beer, which will see a penny per pint knocked off, to help support the pub industry
  • Fuel duty has been frozen again and the 5p cut will remain for another 12 months
    • This is no mean giveaway, as it costs £3bn a year. The aim is to avoid an increased burden on those who have to commute and businesses who rely on getting around on Britain’s roads
    • This is being somewhat balanced by an increase in tax on employees who receive company car benefits
  • Tax on vaping and tobacco duty will continue in the same vein as previous budgets

The Economy & Looking Forwards

  • It wasn’t all hot air and political wrangling when Rachel Reeves announced there was a ‘£40bn fiscal black hole’. The Office for Budget Responsibility (OBR) – the budget watchdog, effectively confirmed the Conservatives misled the public by not disclosing full details of spending, making Jeremy Hunt’s decision to cut National Insurance even more remarkable. The OBR says that if they had received full disclosure, previous economic growth forecasts, which were already lacklustre, would have been even worse
  • Reworked growth forecasts suggest a slightly higher than expected 1.1% for 2024, increasing to 2% in 2025 and reducing down to 1.8% by 2026
    • Previously the OBR had forecast 0.8% this year, 1.9% in 2025 and 2% in 2026
  • Inflation on the other hand is set to average at 2.5% for 2024, rise to 2.6% next year before coming down to 2% by 2029 – a much more comfortable position than we have all faced over the last few years
  • The way that debt is defined and measured is changing (wouldn’t it be nice if we could all do that…). Reeves has however promised to not borrow for day-to-day spending and to balance the books by 2029, for the increased borrowing required over the next couple of years
    • This should reduce net debt from £127bn to £71bn and ideally lower the country’s very large interest rate bill at the same time, which will allow the unfreezing of our income tax rate bands
  • This, combined with tax rises and closing various tax loopholes, has allowed pledges of sizeable spending on the NHS, housing, education and defence, far above the average increase in public spending of 1.5% in real terms

And finally…get advice from a financial expert

If you’re feeling overwhelmed, consider a no-cost, no-commitment consultation with one of our financial planners. They can offer personalised advice, help you navigate complex tax rules, and develop a plan that suits your needs.


Any money invested carries an element of risk and you are not guaranteed to get back the money you invested. This article does not constitute advice and you should consult your financial adviser prior to any action.