Budget October 2024
Rachel Reeves made history as the first woman Chancellor and the first Labour MP in 14 years to deliver the UK budget. Taking the floor, she affirmed the country’s mandate for change and pledged to bring it.
Central to her plan is a £40 billion package of tax increases and spending cuts aimed at restoring economic stability. Among the headline changes, Reeves confirmed a 1.2% rise in employers' National Insurance starting April 2025, taking the rate from 13.8% to 15%. The threshold will also drop to £5,000 from £9,100, anticipated to generate £25 billion annually by the decade’s end. To support smaller businesses, however, the Employment Allowance will double to £10,500, exempting 865,000 employers from National Insurance next year.
In another widely anticipated move, private schools will face a 2025 VAT on fees, alongside a removal of business rates relief.
Additional tax adjustments include an increase in Capital Gains Tax, with the lower rate rising to 18% and the higher to 24%, while corporation tax will be capped at 25%. Inheritance tax thresholds are frozen for another two years, with pensions inherited after 2027 also subject to inheritance tax. A stamp duty hike on second homes, from 3% to 5%, takes effect immediately.
Income tax and National Insurance thresholds will not extend their freeze, resuming inflation-based adjustments by 2028/29. Reeves also announced the end of the non-Dom tax regime, with the domicile concept removed from the tax system from 2025.
In line with a pro-labour stance, Reeves confirmed a minimum wage increase in April, with rates for those over 21 rising to £12.21 per hour. Carer’s Allowance will also increase to match 16 hours per week at the National Living Wage. Other relief measures include a continued fuel duty freeze, a penny reduction on draft alcohol, and sustained EV incentives for company car tax from 2028.
The government will invest £100 billion in capital projects over five years, with a notable £22.6 billion earmarked for the NHS.
Closing her address, Reeves emphasised these strategic choices as essential to stabilizing the country’s economic foundations—though, as always, the finer details will reveal the full impact.
Commenting on the Budget, IAB CEO Sarah Palmer said: “Given the stories in the press over the last few weeks, this Budget was better than expected for small businesses. However, with the announcements around the increase in NI, the dropping of the threshold at which employers pay NI plus the increase in the National Minimum Wage, there is clearly a Payroll Cost to business.
“On a positive note though, we were pleased to see that the changes around NI have effectively protected micro businesses, many of whom are clients of our Members.”
She also added: “Don’t forget to check out the Croner-i live feed tomorrow to find out how it will affect you and your clients.”