The Autumn 2024 Budget - A Summary

In her first budget as Chancellor, Rachel Reeves announced substantial tax changes and increased spending aimed at revitalising the economy and improving public services. Here’s a straightforward summary of the main points likely to impact everyday life.

1. National Insurance Changes

Employers’ national insurance contributions will rise by 1.2% from April 2025, with the threshold for contributions dropping from £9,100 to £5,000. While employees won’t see direct increases, this change is expected to raise £25 billion annually. It’s a significant step towards funding public services, but there are concerns about its impact on job growth.

2. Income Tax and Inheritance Tax Adjustments

Personal income tax thresholds will increase in line with inflation from 2028, aiming to keep more people out of higher tax bands. For those managing inheritance, the tax threshold freeze will extend to 2030, and inherited pension pots will be taxable from 2027. Capital gains tax rates will also rise modestly, excluding sales of second homes, but these changes are expected to raise only moderate revenue.

3. National Living Wage Boost

The national living wage will increase by 6.7% to £12.21 per hour, delivering around £1,400 extra a year for full-time workers. This rise is intended to support cost-of-living improvements, although businesses have expressed concerns over the impact on employment costs.

4. Support for Schools and the NHS

The budget allocates significant funds to schools, with £6.7 billion for building improvements and £1 billion towards special education. The NHS will receive a £22.6 billion uplift in day-to-day funding, alongside plans to address productivity and hospital capacity issues. These investments aim to tackle critical concerns around education and healthcare infrastructure.

5. Housing and Planning Initiatives

A £5 billion investment in housing will focus on affordable housing and increasing the supply of council homes, with reduced Right-to-Buy discounts and additional planning officers to speed up building projects. These steps align with the government’s goal of building 1.5 million new homes and supporting sustainable housing growth.

6. Energy and Fuel Duty

To aid with energy costs, £3.4 billion will be directed towards the Warm Homes Plan, which will focus on energy efficiency upgrades. Additionally, the freeze on fuel duty will continue for another year, maintaining the previous government’s 5p cut. This decision is expected to keep fuel costs stable, addressing concerns over rising household expenses.

7. VAT on Private School Fees and Changes to “Sin Taxes”

VAT will be added to private school fees from January 2025, a policy that may shift some students to the state system. Tobacco and vape taxes will increase, with additional levies on sugary drinks, though pub-goers will see a minor 1p reduction on draught beer duty.

8. Investments in Infrastructure and Transport

A substantial boost for transport includes funding for northern rail routes and improvements to major rail and road infrastructure. The budget also promises £500 million to target potholes, a frequent public complaint, and confirms funding for HS2 tunnelling at Euston.

9. Defence, Local Government, and Other Sectors

Defence will see a £2.9 billion boost, alongside increased support for local governments, particularly in social care. An additional £1.3 billion will support grants for local councils, allowing them greater control over spending. Reeves also announced major investments in industries such as aerospace, automotive, and life sciences, underscoring a focus on innovation and job creation.

Final Note

This budget marks a new direction with its increased focus on public services, targeted investment, and consumer support. Reeves emphasised the Labour government’s goal of creating a fairer, more sustainable economy, aiming to improve living standards and rebuild the UK’s key institutions.