Autumn Budget 2024 – ‘Fixing the foundations to deliver change’

The first Budget to be delivered by a female Chancellor and the first Labour Budget for 15 years made for a landmark one in many ways. However, the speculation leading up to it was, in common with all recent Budgets, accompanied by the usual trail of breadcrumbs indicating its likely direction. 

Pre-Budget announcements, set against a backdrop of the need to find £40bn to cover the ‘black hole’ in the nation’s finances and meet immediate spending needs and commitments, included:

• A means-tested Winter Fuel Allowance for pensioners but also a commitment to continue the pension triple-lock;
• A change in the capital borrowing fiscal rules giving more leeway for investments designed to promote economic growth;
• VAT on private school fees and loss of business rates charitable status;
• Increase in the National Living Wage to £12.21 per hour whilst those aged 18-21 will receive £10 per hour;
• A commitment of £500m to build new social housing, £1.4bn to fix crumbling schools, £10bn for the NHS to tackle waiting lists and £1.8bn for government-funded childcare;
• A rise in the level of windfall tax on energy companies.

All these measures were added to by new Chancellor Rachel Reeves in what many observers regarded as a significant and far-reaching attempt to address perceived problems with the UK’s fiscal and economic well-being.

The headlines

The Budget speech itself was long and the supporting documentation subsequently released by the Treasury contained voluminous detail which will be mulled over for some time yet. Here are the headline measures we’ve picked out as of particular interest to contractors and the labour supply industry.

• The Government has decided that the outcome of the consultation ‘Tackling non-compliance in the umbrella company market’ should be future legislation. This will likely result in the recruitment agency being made ultimately responsible for ensuring the correct amount of PAYE and NICs is received by HMRC. Discussions over draft legislation will take place before possible implementation in April 2026.
• Employer’s National Insurance Contributions will rise by 1.2% to 15% in April 2025 whilst the Secondary Threshold at which these contributions bite will reduce from £9,100 pa to £5,000 pa. To counterbalance this the Chancellor announced an increase in the Employment Allowance from £5,000 to £10,500 which may help some small employers.
• Businesses, contractors and the general public will have been pleased to learn that the fuel duty freeze and temporary 5p cut is to be maintained for another year.
• The main rates of Capital Gains Tax that applies to assets other than residential property is to rise, the lower rate will increase from 10% to 18% and the higher rate will increase from 20% to 24% for disposals made after Budget Day. These new rates will match the residential property rates, which are not changing.
• Limited Company Contractors should be aware that the Chancellor also announced that the limit of Business Asset Disposal Relief is to remain at £1m but that the Capital Gains Tax rate will increase from 10% to 14% from April 2025 and then again to 18% from April 2026.
• Amendments were proposed to Inheritance Tax (IHT) including inclusion of unused pension pots in the estate. Business and agricultural assets of up to £1m won’t attract IHT and the current threshold over which tax is charged will be frozen at £325,000 (increased to £500,000 where a residence is passed on to direct descendants) for 2 years.
• The Stamp Duty Land Tax surcharge payable on a second or subsequent property purchase increases from 3% to 5% from 31 October 2024.
• A Corporate Tax Roadmap was published alongside the Budget with commitments to cap the Corporation Tax rate at 25% for the duration of the Parliament and to retain the small profits rate and marginal relief at current rates and thresholds.
• For personal taxpayers Ms Reeves committed to unfreeze the Income Tax thresholds from 2028 when they will again rise in line with inflation.

There is much to ponder from the new Chancellor’s first Budget and with potential tax changes effective from April next year the time for tax-efficient planning is limited. Once the full ramifications of the new measures have been fully digested thoughts should be turning to ways in which their impact can be mitigated.