As Chancellor Rachel Reeves took the podium to deliver the Budget 2024, all eyes were on the ambitious new policies and initiatives designed to fix the foundations of Britain’s economy. These aim to provide some financial relief to millions after years of slow growth and economic challenges. Facing a staggering £22 billion “black hole” of in-year spending burdens, the highest levels of debt since the 1960s, as well as declining living standards, the Chancellor presented a series of bold decisions aimed at addressing the structural issues facing the UK. This mission-led budget is driven by a promise to not only “restore stability,” but revitalise the UK economy, rebuild public services, support business growth, and protect household incomes.
This quick summary, brought to you by ST Accountancy, provides a breakdown of the Budget 2024 highlights and what they mean for you as a taxpayer, business owner, or corporate client. Here’s what you need to know.
Tackling the Cost-of-Living Crisis
Living standards have been under pressure for years, and Budget 2024 takes several steps aimed at protecting and uplifting working individuals. A key focus has been to shield households from higher taxes, with income tax, employee National Insurance, and VAT rates all remaining unchanged.
- National Living Wage Increase: From April 2025, the National Living Wage will rise to £12.21, with the long-term vision of standardising this rate across all adults. This boost is designed to increase household incomes and help workers cope with inflationary pressures, providing financial relief to millions, particularly in lower-income brackets.
- Draught Duty Cuts and Bus Fare Controls: To further ease everyday costs, the government will cut duty on draught pints, which should be a relief to pub-goers and help local pubs thrive. Additionally, bus fare caps will be maintained, providing affordable public transport access. This is particularly important for those who rely on it as their primary method of commuting.
A Strong Focus on Public Services
One of the core missions of this Budget is to “rebuild Britain,” a theme central to the Chancellor’s address. The government is investing heavily in essential public services and infrastructure to improve day-to-day life for UK residents.
- Over £100 Billion in Public Investment: Over the next five years, the UK will see a substantial public investment, surpassing £100 billion. This funding is earmarked for essential areas, such as hospitals, schools, and road works. For example, an additional £500 million will go toward local road maintenance in 2025-26, with an ambitious plan to fix an extra one million potholes annually.
- Reducing NHS Waiting Lists: Another major component of the budget is the commitment to address healthcare backlogs and reduce NHS waiting lists, which have become a significant concern for many. This investment should improve access to healthcare services, enhance patient outcomes, and restore public confidence in the NHS.
Supporting Small Businesses and Entrepreneurs
Small businesses are at the heart of the UK economy, and the Chancellor has included several initiatives aimed at helping sole traders and small-to-medium-sized enterprises (SMEs) get back on track.
- Employer’s National Insurance: From April 2025, Employer’s National Insurance will see an increase to 15%. The threshold at which contributions begin to become liable from will decrease from the annual amount of £9,100 to £5,000 as well. Additionally, the employment allowance will increase from £5,000 to £10,500, which is good news for smaller businesses that benefit from this offset against National Insurance contributions.
- Annual Investment Allowance: The £1 million Annual Investment Allowance remains unchanged, allowing businesses to invest in equipment and other capital expenses with a full tax deduction. This can be a helpful incentive for those looking to expand or upgrade their operations without being penalised by high tax bills.
- Modernising HMRC Systems: To support efficient tax processes, the government will invest in modernising HMRC systems. This upgrade will streamline tax filing and compliance, making it easier for businesses to stay on top of their obligations and reduce administrative burdens.
Tax Changes Impacting Businesses and Individuals
Several changes to tax policies were introduced in the Budget, with a mix of adjustments that will affect both individual taxpayers and business owners.
- Corporation Tax Cap: Corporation tax will be capped at 25% for the duration of this Parliament, providing a level of certainty for businesses. The small profits rate and threshold will also remain the same, which is helpful for smaller companies looking to manage their tax liabilities effectively.
- Capital Gains Tax: From April 2025, Capital Gains Tax will see an increase, with the lower rate going up from 10% to 18% and the higher rate from 20% to 24%. However, the Property Capital Gains Tax rate remains unchanged, and the Business Asset Disposal Relief rate stays at 10% (up to £1 million), but it will rise to 14% from April 2025.
- Inheritance Tax Reforms: Inheritance Tax thresholds will stay frozen, but starting in 2027, pensions will be included in the inheritance tax estate calculations. This change may impact high-net-worth individuals who have traditionally relied on pensions as a tax-efficient inheritance vehicle.
- Stamp Duty Surcharge: Those purchasing second homes will face a 2% increase in the Stamp Duty Land Tax surcharge, taking effect from October 31st. This measure aims to discourage property speculation and free up more housing for primary residents.
- VAT on Private School Fees: Effective January 2025, VAT will be applied to private school fees, while business rates relief for these institutions will end in April 2025. This change could impact families relying on private education but aims to balance educational funding across the public sector.
Enhanced Worker Protections
The Chancellor’s focus on supporting workers includes several measures to improve employee protections and benefits across the UK. These initiatives reflect the government’s commitment to creating a fairer, more reasonable workplace environment.
- Carer’s Allowance and Work Hours: The carer’s allowance threshold will rise, allowing carers to work up to 16 hours per week at the National Living Wage. This adjustment will offer more financial stability for caregivers while enabling them to maintain employment.
- Maternity and Paternity Policies: Improvements in maternity and paternity leave policies will benefit new parents, supporting them with enhanced leave entitlements that offer better work-life balance and financial security during critical family periods.
- Protection from Unfair Dismissal: To ensure job security, stronger protections from unfair dismissal will be introduced, reinforcing worker rights and providing a safeguard for employees who may face challenges at work.
Additional Budget Highlights
Several other significant measures were introduced in Budget 2024, designed to enhance public services, support businesses, and build a more sustainable economy:
- Fuel Duty Freeze: Fuel duty will be frozen, a welcome relief for both individuals and businesses reliant on vehicles, especially given rising fuel prices.
- Air Passenger Duty Increase for Private Jets: A 50% increase in air passenger duty for private jets is set to impact the luxury travel market. This measure seeks to support environmental goals by discouraging high-emission travel.
- Non-Dom Tax Regime Abolition: The government will abolish the non-dom tax regime, replacing it with a residence-based tax system, marking a significant change for high-net-worth individuals and foreign nationals who benefit from non-dom status.
- Business Rates Relief for Retail, Hospitality, and Leisure: The existing 40% business rates relief will continue for retail, hospitality, and leisure sectors in 2025-26, with a cap of £110,000 per business. This move provides stability for industries that have faced considerable challenges over recent years.
- State Pension Increase: The state pension will see a 4.1% increase, supporting retirees and helping them keep up with inflation.
Aiming for Long-Term Economic Growth
Budget 2024 represents the government’s commitment to rebuilding Britain, with the ambitious goals of restoring economic stability, investing in critical infrastructure, and lifting up the country’s workers. By focusing on a broad spectrum of areas—ranging from tax reforms and wage increases to environmental levies and public service funding—the Chancellor has set out to create a robust framework for growth over the next several years.
At ST Accountancy, we understand that tax changes and new policies can bring both opportunities and challenges. Whether you’re a sole trader, SME, or corporate client, we’re here to help you navigate these shifts effectively. Our experienced team is ready to provide tailored advice and support, ensuring you make the most of these changes to achieve your financial goals.
If you’d like to discuss how Budget 2024 might affect you or your business, contact us today, and let’s work together to turn these new policies into new opportunities.
