October 2024 – Labour Budget Summary

Key Points Summary

National Insurance

• Employee Contributions: Employees will not see an increase in National Insurance contributions. However, employers’ contributions will rise by 1.2 percentage points to 15%, effective April.
• Threshold Adjustment: The secondary threshold will be reduced from £9,100 to £5,000.
• Revenue Impact: These changes are projected to raise £25 billion annually by the end of the forecast period.
• Employer Rate Details: The employer rate increase from 13.8% on earnings over £175 weekly is estimated to generate £8.5 billion.

Income Tax

• Threshold Adjustment: Starting in 2028-29, personal tax thresholds for income tax and national insurance will align with inflation.

Capital Gains and Inheritance Tax

• Capital Gains Tax: The lower rate will increase from 10% to 18%, and the higher rate will rise from 20% to 24% for disposals made on or after 30 October 2024.
• Inheritance Tax Threshold: The freeze on the £325,000 inheritance tax threshold will continue, with further reforms anticipated for reliefs on business and agricultural assets.
• Agricultural and Business Reliefs: From April 2026, combined agricultural and business assets will receive a 100% relief on the first £1 million, then 50% thereafter, including specific reforms for “not listed” shares.
• Pension Inheritance: Unspent pension funds will fall under inheritance tax from April 2027, impacting approximately 8% of estates.

Minimum Wage

• Increase: The National Living Wage for over-21s will increase by 6.7% to £12.21, equating to an additional £1,400 annually for full-time eligible workers.
• Equalisation: A single adult rate will be introduced gradually to align wages for under-21s with older workers.

Tobacco and Alcohol

• Vape Levy: A levy on vapes will align with existing tobacco rates.
• Draught Duty: A reduction of 1.7% in draught duty is projected to save pub-goers roughly one penny per pint.

Fuel Duty

• Freeze Extension: The current freeze on fuel duty and the 5p cut from the previous government will remain in effect for another year.

Private School Fees

• VAT Introduction: VAT will be applied to private school fees starting January 2025.

Housing

• Investment: £5 billion will be allocated to increase affordable housing supply.
• Right-to-Buy Adjustments: Reductions in discounts will allow local governments to reinvest earnings from council housing sales.
• Planning Staff: The government plans to employ hundreds of new planning officers to accelerate housebuilding.

Transport

• Major Commitments: Projects include the TransPennine Route Upgrade, capacity improvements at Manchester Victoria, electrification of Wigan to Bolton, and support for the east-west rail link between Oxford and Cambridge.
• HS2: Funding will support tunnelling the HS2 route to London Euston.
• Road Infrastructure: An additional £500 million will be allocated to address potholes next year.

Public Spending

• Budget Increases: Real government department spending will increase by 1.5%, or 1.7% with capital spending included.

Education

• School Funding: £2.3 billion will support teacher hiring, and an additional £300 million will go to higher education.
• Special Needs Support: An extra £1 billion will be allocated to fund special needs programs.

Defence

• Military Funding: Defence spending will increase by £2.9 billion next year, with additional funding for WWII commemorations.

Local Government

• Additional Funding: £1.3 billion in new grant funding will support local governments, with £600 million earmarked for social care.
• Regional Settlements: Greater Manchester and the West Midlands will receive integrated settlements for more localised control over spending.

Public Investment

• Debt Strategy: New measures will aim to reduce debt as a share of the economy, targeting a decline by 2029-30.
• Sector Investments: Investment of £1 billion in aerospace, £2 billion in automotive for electric vehicle development, and £500 million for life sciences, with £6.1 billion allocated across engineering, biotechnology, and medical science sectors.

Air Travel

• Passenger Duty: Air passenger duty will rise by up to £2 for economy short-haul flights. Private jets will face an extra 50% duty, up to £450 per passenger.

Business Taxes and Non-Domiciles

• Business Rates Relief: Retail and hospitality sectors will benefit from a 40% relief on business rates, capped at £25,000.
• Oil Profits Levy: The levy on oil profits will increase to 38% and be extended.
• Non-Dom Abolition: Non-domicile tax status will be abolished from April.

Compensation Schemes

• Victims’ Support: £11.8 billion will support victims of the infected blood scandal, with an additional £1.8 billion for victims of the Post Office Horizon IT scandal.

Anti-Tax Avoidance Measures

• Revenue from Anti-Avoidance: £6.5 billion will be raised by targeting tax avoidance schemes, including umbrella companies.

Economic Forecasts and the OBR

• OBR Review: The OBR has published a review revealing a £22 billion gap in unfunded pledges by the previous government.
• Inflation Target: The inflation target will remain at 2%.
• Growth Projections: Growth is forecasted to be 1.1% in 2024, rising gradually to 1.6% by 2030.

Government Borrowing

• New Fiscal Rules: The government will implement a rule to balance the current budget within three years.
• Deficit and Debt Reduction: A deficit of £26.2 billion in 2026 will shift to a surplus of £10.9 billion by 2027-28, with public sector net debt expected to decrease from £127 billion in 2024-25 to £70.6 billion by 2029-30.

 

 

Sources: Autumn Budget 2024 – HC 295; Budget 2024: Key points from Rachel Reeves’s speech – BBC News; Budget 2024: key points at a glance | Autumn budget 2024 | The Guardian

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