Below are some of our key takeaways from the Chancellor of the Exchequer’s autumn statement 2024 budget that will impact business. This information comes from coverage on Wednesday 30th October 2024 by Rachel Reeves and previous announcements.
Economic outlook
- GDP expected to grow by just over 1% in 2024.
- Borrowing expected to rise from £122bn to £127bn in 2024.
- The size of the state will reach 44% of GDP by the end of the decade – almost 5% larger than before the pandemic.
- The total tax take will reach a historic high of 38% of GDP by 2029/30.
- Increased tax and borrowing will push up inflation by around 0.5% with a projected rise to 2.6% in 2025.
- Private consumption predicted to fall by nearly 1% of GDP by 2029/30 due to increased taxes reducing real incomes.
- Business investment is predicted to fall by £25bn due to the pressure on profit margins from tax changes by 2029/30.
- Increased public sector activity is expected to crowd out some private sector activity, potentially pushing up prices for businesses.
Personal taxes
- Capital Gains Tax (CGT) – Increase lower rate from 10% to 18% and higher rate from 20% to 24% and the rate on carried interest to rise to 32% from April 2025 and a new system to be announced in future.
- Inheritance Tax (IHT) – Thresholds frozen until 2030 but inherited pensions will be brought into IHT from April 2027.
- Income tax – From 2028/29, personal income tax thresholds will be increased in line with inflation again.
Personal policies
- The state pension will rise by 4.1% in April 2025 (already announced).
- VAT will be added to private school fees from 1st January 2025 (already announced) and business rates relief will be removed from April 2025.
- Non-Dom status – Abolished from April 2025 to be replaced by a residence-based system.
- Soft drinks industry levy – Increase in line with CPI each year.
- Tobacco duty – New escalator to increase by RPI +2%, a 10% increase on hand-rolled tobacco and a new duty on vaping liquid from 2026.
- Alcohol duty – Increase in line with CPI but cutting ‘draft’ duty by 1.7%.
Business taxes
- Corporation Tax (CT) – Will be maintained at 25% until the end of this Parliament and maintaining the full expensing policy.
- Employer’s National Insurance Contributions (NICs) – Increase 1.2% to 15% from April 2025 and reducing the secondary threshold from £9,100 to £5,000 per annum.
- Employment allowance – Increased from £5,000 to £10,500.
- Business rates – Relief of up to 40% for small retailers up to a maximum discount of £110k, rather than the end of the 75% discount in April 2025.
Business policies
- Employer’s Minimum Wage – The minimum wage is set to rise by 6.7% from £11.44 per hour to £12.21 per hour from April 2025 for those over 21 years of age. This equates to approximately £22,282 per annum for someone working 35 hours per week. For 18-20 years of age, it will rise by over 16% to £10 per hour, eventually aligning with the over 21 years of age rate. For apprentices, it will rise by nearly 18% to £7.55 per hour.
- Capital Gains Tax (CGT) – Maintain the lifetime limit for business asset disposal relief of £1m, which will remain at 10% this year and rise to 14% in April 2025.
Environmental/energy policies
- Fuel duty – Frozen for 2025 and 2026.
- Energy profits levy will rise by 3% to 38% on 1st November 2024 but also removing the 29% investment allowance.
- Maintaining EV incentives in company car tax relief.
- Air Passenger Duty (APD) – Increase by no more than £2 for short-haul economy flights but private jet flights increased by 50%.
Government investments
- Committed funding to complete HS2 from Birmingham to London Euston.
- Committed £500m extra funding for road maintenance.
- Committed £20bn for “industries of the future” including over £6bn for core research including £1bn for aerospace and £2bn for the EV industry.
- Committed £5bn for a new housing plan including increasing the Affordable Homes Programme to £3.1bn.
- Committed £3.1bn increase in health services capital budget with an additional £1.5bn for new hospital beds.
- Committed £6.7bn for school building and maintenance, including £1.4bn to rebuild the most in-need 500 schools.
- Committed over £100bn in capital spending over 5 years, which is expected to contribute +1.4% to GDP in the long-term.
Conclusion on the autumn statement 2024 budget
It will take some time for all of us to fully quantify the impact on ourselves and businesses. With increased taxes and changes to borrowing rules, this sets the landscape for the future years of the current Government. Whether this autumn statement 2024 budget helps or hinders the economy is yet to be seen.
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