Chancellor Rachel Reeves delivered her first Budget on 30 October 2024 aimed at “national renewal.” The Budget offers some relief to low-income workers, whilst businesses and higher earners face significant tax rises. Here are the key highlights:
- Tax Hike for Businesses:
- Employers will see a 1.2% increase in National Insurance Contributions from 6 April 2025, raised from 13.8% to 15%.
- Employers’ NIC threshold is lowered to £5,000 from £9,100. This will take effect from 6 April 2025 up to 5 April 2028.
- Capital Gains Tax:
- Capital gains tax rates on disposal of shares rose to 18% and 24%, from 10% to 20%. This applies to disposals made on or after 30 October 2024. Second homes’ CGT rates remain the same.
- Income Tax and Inheritance Tax:
- There are no changes in income tax. However, it was announced that personal tax thresholds will be adjusted for inflation from the 2028-29 tax year.
- The inheritance tax threshold will be frozen until 2030, whilst inherited pension pots are now subject to new rules.
- Minimum Wage Increase:
- The national living wage (for people aged 21 and over) will increase by 6.7% to £12.21 an hour. The national minimum wage (for 16-20-year-olds) will increase by 16.3% to £10 an hour.
- Schools and Education:
- From January 2025, private schools will no longer be exempt from VAT and Business Rates.
- Public Investment:
- The government plans to invest over £100 billion in infrastructure, education, and healthcare over the next five years.
- The Department for Education will receive £6.7 billion for capital investment; £1 billion for special educational needs; £22.6 billion boost to the health budget.
- Regulations and Compliance:
- New rules will target tax avoidance, aiming to generate £6.5 billion, alongside compensation schemes for victims of past government scandals.
- Future Economic Outlook:
- The government aims to maintain a 2% inflation target through the Bank of England and has introduced stricter borrowing rules for day-to-day spending, expecting to balance budgets in the near future.
This Budget sets the stage for Labour’s vision of reinvigorating the UK’s economy and public services, transitioning from years of Conservative policies to a focus on investment, growth, and stability. Stay tuned to the latest tax changes at Legend Financial!
