Autumn Budget update – the key news from the chancellor’s statement
Almost four months after Labour won the general election, chancellor Rachel Reeves has delivered her 2024 Autumn Budget, outlining the government’s plans for this tax year and beyond.
Against a backdrop of a manifesto pledge not to increase Income Tax, employee National Insurance, or VAT, Reeves also announced that her Budget would raise taxes by £40 billion, stating that any other chancellor would “face the same reality”.
National living wage
The chancellor announced a 6.7% rise in the national living wage for workers aged 21 and over, from £11.44 to £12.21 an hour, effective 6 April 2025.
In addition, the national minimum wage for people aged 18 to 20 will rise from £8.60 to £10 an hour.
Apprentices will receive the biggest pay increase, with hourly pay rising from £6.40 to £7.55 an hour.
The announcement could significantly increase outgoings for businesses, particularly when coupled with reforms to employers’ NI.
Employer National Insurance contributions
Employer National Insurance (NI) rates are set to rise by 1.2% from 13.8% to 15%, effective 6 April 2025.
The threshold at which employers pay NI is currently only above £9,100 a year. Effective 6 April 2025 this threshold will now be reduced to £5,000 a year and will remain at £5,000 until 6 April 2028 and then increase in line with the Consumer Prices Index (CPI) thereafter.
At the same time, the government is increasing the Employment Allowance.
The current Employment Allowance gives employers with NI bills of £100,000 or less a discount of £5,000 on their employer NI bill. From 6 April 2025, the Employment Allowance will rise to £10,500. The government will also expand the Employment Allowance by removing the £100,000 eligibility threshold so that all eligible employers now benefit.
Income Tax thresholds
Back in 2021, the Personal Allowance and the threshold at which higher-rate Income Tax is due was frozen until 2016. Then, in the 2022 Autumn Statement, this freeze was extended until 2028.
Unexpectedly, the chancellor decided against extending the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation once again.
Capital Gains Tax reforms
As of 30 October, the main rates of CGT have increased. The basic rate has risen from 10% to 18% and the higher rate has increased from 20% to 24%.
Residential property rates remain unchanged at 18% and 24%
The government will maintain the lifetime limit for Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – at £1 million. Meanwhile, the lifetime limit for Investors’ Relief (IR) will be reduced from £10 million to £1 million.
The BADR and IR rate of CGT will continue to be charged at 10%, before rising to 14% on 6 April 2025 and 18% on 6 April 2026.
Furthermore, CGT on carried interest – paid by private equity managers – will rise from 18% (basic rate) and 28% (higher rate) to 32% from 6 April 2025. There will be further reforms from April 2026 to bring carried interest within the Income Tax framework, under bespoke rules.
Inheritance Tax reliefs
As expected, the chancellor made key announcements that could affect estate planning.
Nil-rate bands
The freeze on IHT thresholds will be extended by an additional two years, to 2030. The nil-rate band and residence nil-rate band will remain at £325,000 and £175,000 respectively.
Pensions
The chancellor announced she was closing the “loophole” that gives pensions preferable IHT treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.
Agricultural Property Relief
Currently, individuals can claim up to 100% relief on agricultural property (land or pasture that is used to grow crops or rear animals).
From 6 April 2026, the first £1 million of combined business and agricultural assets will continue to attract no IHT at all. However, for assets above this threshold, IHT will apply with 50% relief.
Business Property Relief
From 6 April 2026, the government will also reduce the rate of Business Property Relief from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as the AIM.
ISA subscription limits frozen until 2030
The chancellor confirmed that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.
Additionally, the starting rate for savings will be retained at £5,000 for 2025/26, allowing individuals with less than £17,570 in employment or pension income to receive up to £5,000 of savings income tax-free.
A change to business rates relief
The current business rates relief system is set to run until April 2025. It effectively serves as a reduction on business rate bills for eligible businesses, with retail and hospitality firms having been key beneficiaries.
The chancellor announced that, from 2026/27, permanently lower tax rates will be introduced for retail, hospitality and leisure properties.
Additionally, for 2025/26, some retail, hospitality, and leisure properties will receive 40% relief on their bills, up to a cash cap of £110,000 per business.
Fuel duty
Fuel duty has been frozen since 2011, and the 5p cut brought in by the previous government in 2022 will be frozen for another year. This will save the average motorist £59 in 2025/26.
Duties for alcohol, tobacco, and vaping
The chancellor confirmed a reduction in the duty for draught alcohol, cutting duty on an average strength pint by a penny. Rates for non-draught products will increase in line with the Retail Prices Index (RPI) from 1 February 2025.
Furthermore, a new vaping duty will be introduced from 1 October 2026, standing at £2.20 per 10 ml of liquid. Meanwhile, there will be a one-off tobacco duty rise designed to maintain the incentive to choose refillable vaping over smoking.
Reforms to the non-dom regime
Currently, for UK residents whose main residence – or “domicile” – is elsewhere in the world, income and gains are taxed differently, depending on factors such as how long individuals are resident in the UK.
The chancellor confirmed that the tax regime for non-domiciled individuals (non-doms) will be abolished from April 2025.
Moving forward, there will be a residence-based scheme with “internationally competitive arrangements” for those who come to the UK on a temporary basis.
VAT on private school fees from January 2025
As promised in their election manifesto, Labour announced that, from 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools.
Additionally, the chancellor announced that she was removing business rates relief from private schools from April 2025.
An end to the £2 bus fare cap
The £2 cap on bus fares introduced by the previous Government is due to end on 31 December 2024.
The chancellor announced that it will extend the cap for a further 12 months but that the cap will rise from £2 to £3.
Confirmation of the 4.1% increase to the State Pension under the triple lock
The basic and new State Pension will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.