Today, Chancellor Rachel Reeves has delivered Labour’s first budget, addressing how the Government plans to raise revenue and restabilise the economy.
National Insurance Contributions by Employer
National Insurance contributions paid by employers will rise by 1.2%, from 13.8% to 15%. The threshold will also decrease from £9,100 to £5,000.
These changes are hoped to raise £25 billion and come into effect from April 2025.
Income Tax
The Government will extend the freeze on income tax brought in by the Conservative government in 2022, looking to uprate the threshold from 2028-29. It is hoped that this will support working people.
Inheritance Tax
Inheritance tax is currently 40% paid on the value of a deceased person’s assets above a £325,000 threshold. This will be frozen to continue at the same rate. Additionally, from April 2027, inherited pensions will be bought under the inherited tax regime (IHT). Pensions are currently exempt from the inheritance tax regime.
Capital Gains Tax
Capital Gains Tax (CGT) is a tax on profit made from the sale of assets that have increased in value. This will rise from 10% to 18%, with the higher rate rising from 20% to 24%.
Minimum Wage
The National Living Wage – that paid to those aged 21 and over – will increase by 6.7% to £12.21, giving an eligible full time worker an extra £1,400 a year.
Inflation and the Economy
The Office for Budget Responsibility predicts that the UK economy will grow to 1.1% this year, an increase of 0.8% from last year. Additionally, it is forecast to grow to 2% in 2025.
Additionally, the UK’s inflation rate is forecast at 2.5% for 2024, with predictions for an average 2.6% for 2025.
Public Services
A 10 year plan to address the NHS health system will be put into effect in Spring 2025. Additionally, there will be a £22.6 billion increase in the health budget with the aim of decreasing waiting lists and increasing capacity for medical procedures.
Housing
Stamp duty land tax (SDLT) on second houses will rise from 3% to 5%, with the aim of raising revenues and supporting first time buyers. This change will come into effect from tomorrow (31st October 2024).
Business
Businesses will receive a 40% relief on business rates for hospitality and retail up to a threshold of £25,000.
Transport
The fuel duty will be frozen again, with the 5p cut in fuel duty on petrol and diesel to continue for another year.
Investment
The Government has stressed that more public investment is needed in order to help the economy. A new rule will be put into place to target debt falling as a share of the economy, with regular reviews from the OBR to report on government investments.
Raising Capital
The Government will target those participating in tax avoidance, aiming to raise £6.5 billion through targeting tax avoidance schemes.
Education
Special education and disability services will have a £1 billion increase in spending, with the core education budget having an increase of £2.3 billion.
Additionally, from January 2025, VAT will be charged on private school fees, with plans to introduce legislation to remove business rates relief from April 2025.
If you want to discuss how these changes will affect you or your business, or if you need business advice, help with business accounting or support on tax, get in touch with our specialist accountants at James & Uzzell today to see how we can help.