This 2024 Autumn Budget, the government has introduced a series of tax changes, economic measures, and spending commitments that reflect a strategic shift toward fiscal stability, with £40 billion in additional taxes aimed at counterbalancing the increased spending needs across healthcare, education, infrastructure, and defense. The budget reveals a comprehensive approach to raising government revenue while addressing structural and social priorities through targeted investment.

The Budget, the first by a UK labour government in 14years,  presents a well-defined fiscal policy aimed at strengthening government finances through a balanced approach of tax increases and targeted spending. While businesses face greater tax liabilities, strategic incentives are available to drive productivity and growth.

Individuals, particularly higher-income households, will feel the effects of tax threshold freezes and indirect tax changes. For CFOs, this budget underscores the importance of strategic tax planning, investment in innovation, and a proactive approach to managing fiscal impacts across their organizations.

Here’s is our round up of the key changes tailored for our Clients to understand the immediate and long-term implications of these decisions.

Direct Taxes

• Corporation Tax: Remains steady at 25% for the highest earnings. No new incentives were introduced for capital investment, but the government committed to a roadmap aimed at predictability to help businesses strategize for the coming years.

• Income Tax:
  • Rates: Unchanged, with a top rate of 45% for earnings over £125,140.
  • Thresholds: The personal allowance and higher-rate thresholds remain frozen until 2028, leading to a “fiscal drag” that increases tax intake as wages rise.

• National Insurance Contributions (NICs):
  • Employer NICs: Increase of 1.2 percentage points, raising the rate to 15% from April 2025. This shift will primarily fund health and social care.
  • Employee NIC Threshold: Reduced to £5,000 annually, impacting take-home pay slightly across the income spectrum.

• Capital Gains Tax (CGT):
  • Annual Exemption: Further reduction to £3,000 in 2025 (from £6,000 in 2024), increasing CGT exposure for individual investors.
  • Rates: Remain at 10% and 20% for basic and higher-rate taxpayers, respectively, with surcharges for property-related gains.

• Inheritance Tax (IHT):
  • Threshold: Frozen at £325,000, with further freezes likely until 2028, driving up IHT liabilities as property values increase.

• Employment Allowance: Continues at £5,000 for eligible employers, offering some relief on NICs for small businesses.

Indirect Taxes

• VAT on Private School Fees: Starting January 2025, private school fees will be subject to VAT, though exemptions apply to institutions with specialized provisions like non-maintained special schools.

• Fuel Duty:
  • Rates: No change to the rate this fiscal year, though adjustments remain under consideration as inflation impacts fuel prices.

• Air Passenger Duty:
  • Domestic Flights: Raised by 10%, aligning with the government’s green agenda and incentivizing lower carbon emissions in air travel.

• Stamp Duty:
  • Residential Property: No rate change, though there is continued focus on policies that support first-time buyers.

• VAT:
  • General rate held at 20%, with no new reliefs introduced for industries impacted by inflation.

Additional Key Reforms and Notable Changes

• National Minimum Wage:
  • Record increase to £12.21 per hour in April 2025 for workers over 21, with corresponding adjustments for younger age brackets. This increase is positioned as a measure to support low-wage workers amid high living costs.

• Crypto-Asset Reporting: The UK will begin enforcing the OECD’s Crypto-Asset Reporting Framework (CARF) from January 2026, aiming to capture tax revenues from crypto transactions and ensure greater transparency in the sector.

• Umbrella Companies: New regulations will require umbrella companies in labor chains to account for PAYE accurately, reducing tax avoidance opportunities within the gig economy.

Spending Commitments

• Healthcare and Social Care: A significant portion of the additional tax revenue is directed towards health and social care to address system pressures and improve service quality.

• Education: Investment in school infrastructure and skills training, particularly focused on STEM, to bolster the UK’s competitive edge in a global economy.

• Infrastructure: Renewed funding for transportation and energy infrastructure aims to support economic resilience and address climate targets.

• Growth Projections | Moderate growth forecasted at 1.6% annually over the next three years, driven by export increases and investment incentives.

• Inflation Control | Assumptions aligned with 2% CPI target by 2026, reflecting fiscal tightening and supply chain normalization.

• Labour Market | Unemployment projected to remain stable, with targeted skills development programs to address productivity gaps.

Brief Summary of Implications for Businesses, Individuals, and Government Spending

• Businesses:
  • Stability in corporation tax aids financial planning, though increased NIC rates raise operational costs.
  • Crypto reporting frameworks and umbrella company accountability will increase compliance obligations, particularly for financial and labor-intensive sectors.

• Individuals:
  • Higher minimum wages benefit low-income households, though fiscal drag from frozen income tax thresholds impacts all earners.
  • Inheritance tax freezes may affect estate planning as more estates are subject to IHT due to inflation in asset prices.

• Government Spending: The budget reflects a careful balance, maintaining commitments to core services while also addressing debt. Additional funds raised from increased NICs and crypto regulation will enhance public services, particularly in health and social care.

Overall this 2024 Autumn Budget reflects a strategic, though cautious, approach aimed at sustaining public services and economic stability amidst ongoing challenges. For more in-depth analysis and industry-specific impacts, please contact us. Https://www.thecfohq.com