Autumn Budget 2024
A new Government, a new Chancellor and a new approach to the UK’s fiscal policies.
Rachel Reeves entered her first Budget with a strong message that her measures would lead to “an economy that is growing, creating wealth and opportunity for all”.
To achieve this, she made it clear that the “only way to drive economic growth is to invest, invest, invest”.
Echoing the last Labour Government’s pledge on “Education, Education, Education” more than 14 years ago, the Chancellor was quick to recognise that there was difficult work ahead with slow economic growth and a £22 billion hole in the public purse.
Recognising her position as the UK’s first female Chancellor of the Exchequer, she pulled no punches about the inheritance that the Government had found and the impact that it would have on her plans as she set out to raise taxes by £40 billion.
She launched into a speech containing a series of policies that would not seek shortcuts but would instead focus on generating economic stability in the long term.
Labour promised a “painful” Budget and the measures confirmed will certainly be challenging for many, as her speech focused on:
- Economic Outlook
- A Tax on Employment
- Capital Gains Tax
- Inheritance Tax
- Overseas Wealth
- Business Tax
- Invest, Invest, Invest
- Final Thoughts
While the Labour Party inherited a black hole of £22 billion, the economic outlook for the UK looks more positive.
The Chancellor said that the Government aimed to build on this to bring “balance and stability” to economic growth, with a focus on long-term goals.
Looking at the OBR’s forecast, real GDP growth will be:
- 1.1 per cent in 2024
- 2.0 per cent in 2025
- 1.8per cent in 2026
- 1.5 per cent in 2027
- 1.5 per cent in 2028
- 1.6 per cent in 2029
To ensure this economic stability is reflected in the nation’s finances, Rachel Reeves has committed the Government to a new set of financial rules.
Under this new approach to fiscal policy, the Government will not borrow to fund current spending and will instead rely on higher taxes to ensure an end to austerity.
Instead, borrowing will only be reserved for investment that benefits Britain’s future.
Before the Budget, the Chancellor and Prime Minister reaffirmed their commitment to not increase Income Tax, VAT and National Insurance for ‘working people’.
Interestingly, the rumoured extension to the tax freeze beyond 2028 also did not go ahead, with personal tax rates in 2028-29 rising in line with inflation.
Instead, Ms Reeves set out changes to employers’ National Insurance Contributions (NICs) that will raise an additional £25 billion.
This huge injection of cash into the public finances will be raised by increasing the rate of employer NICs by 1.2 percentage points from 13.8 per cent to 15 per cent from 6 April 2025.
If this change wasn’t significant enough, the threshold (per employee) at which employers begin paying NICs will decrease from £9,100 to £5,000 per year.
To help the smallest of businesses, the Employment Allowance will increase from £5,000 to £10,500, while also removing the existing £100,000 threshold on employers' Class 1 National Insurance liabilities.
The National Living Wage (NLW) will rise by 6.7 per cent to £12.21 per hour from April 2025 – adding £1,400 to the annual earnings of a full-time worker on the NLW.
The National Minimum Wage (NMW) for 18-20-year-olds will also increase by 16.3 per cent to £10.00 per hour – the largest rise ever in both cash and percentage terms.
The Government is also working towards a unified adult wage rate and has tasked the Low Pay Commission (LPC) with recommending a minimum wage for 18-20-year-olds that will gradually bridge the gap with the main NLW rate.
One of the most immediate and substantial changes in the Budget was an increase in the standard Capital Gains Tax (CGT) rate.
From today, the main rates of CGT will change as follows:
- Lower rate – Increases from 10 per cent to 18 per cent
- Higher rate – Increases from 20 per cent to 24 per cent
The separate CGT rates for property disposals will remain unchanged.
However, those looking to dispose of a business or a significant shareholding via a sale or succession should take note of changes to Business Asset Disposal Relief (BADR).
The CGT rates for BADR and Investors’ Relief will increase to 14 per cent from 6 April 2025 and match the main lower rate of 18 per cent from 6 April 2026.
The lifetime limit for Investors’ Relief will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, aligning it with the existing lifetime limit for Business Asset Disposal Relief.
For those hoping to pass on wealth to the next generation, there was more bad news with significant changes to two key elements of an individual's estate.
The Government is tightening the Inheritance Tax (IHT) system by imposing the tax on unspent pension pots from April 2027 and cutting back the benefits of agricultural property relief and business property relief.
Despite existing nil-rate bands and exemptions, the 100 per cent relief will only apply to the first £1 million of combined agricultural and business assets, dropping to 50 per cent after that – adding pressure on family farms and businesses.
The Government also plans to reduce business property relief to 50 per cent across the board for shares “not listed” on recognised stock exchanges, like AIM.
Also, while the tax rates on Income Tax will be unfrozen from April 2028, for IHT the nil-rate bands will remain unchanged until April 2030.
As planned, the Labour Party will abolish the current non-dom tax status from 6 April 2025.
In its place, it will introduce a new residence-based regime. Individuals opting into the regime will get a short-term break, avoiding UK tax on foreign income and gains for only the first four years of tax residence.
However, from 6 April 2025, the Government will introduce a strict residence-based system for Inheritance Tax, effectively ending the use of offshore trusts to shield assets from IHT.
The 50 per cent reduction in foreign income in the first year, previously proposed by the last Government, will be scrapped entirely.
For Capital Gains Tax, remittance basis users can rebase foreign assets to 5 April 2017 upon disposal under restrictive conditions, offering limited benefit, while overseas Workday Relief will remain but in a reformed, restrictive format.
In addition, the Temporary Repatriation Facility will be extended to three years with expanded scope to offshore structures.
To provide certainty to businesses looking to invest and grow, the Chancellor left the existing Corporate Tax rates and reliefs relatively untouched.
In its Corporate Tax Roadmap, the Government has confirmed that it will retain the cap on the rate of Corporation Tax at 25 per cent.
It also reiterated that it remained committed to maintaining the UK’s generous R&D tax reliefs and world-leading capital allowance offer. Full Expensing, the Annual Investment Allowance, and the Patent Box scheme will all stay the same.
Businesses will also be able to benefit from an extension to the 100 per cent first-year allowances for zero-emission cars and electric vehicle charge-points to 31 March 2026 for Corporation Tax and 5 April 2026 for Income Tax.
The key message of the Government’s speech was the promise to invest in long-term growth.
To achieve this capital investment will be boosted by more than £100 billion over the next five years, with a focus on transport, housing and R&D.
Alongside this investment, the Government has reiterated its commitment to the National Wealth Fund, which will bring together private and public sector funding to encourage more than £70 billion of private investment.
The Government has also introduced plans for a forward-looking Industrial Strategy to boost investment in key growth sectors and initiated a pensions review aimed at unlocking more investment in UK growth assets.
For small and medium-sized companies this latest Budget will be a blow, both for the organisation itself and its owners.
The significant hike in National Insurance and the National Living Wage will more than likely limit job creation, suppress wage increases and add unwanted ongoing costs to businesses still struggling with a cost-of-living crisis.
Changes to Capital Gains Tax and Inheritance Tax will also restrict the ability of business owners to generate wealth from their enterprise and pass it on.
However, if Labour can achieve its promised investment in national growth and calm the markets with its promises of innovation and Corporation Tax certainty then the nation may benefit from greater economic prosperity.
Those people who find themselves facing uncertainties about their future plans as a result of this Budget must seek professional advice urgently.
To read the full Autumn Budget document, please click here.
Lessons from Gareth Southgate – Leadership insights for business owners
The recent resignation of Gareth Southgate as England manager, after an impressive eight-year tenure, marks the end of an era.
Opinion is divided on Southgate’s time as England boss.
However, it cannot be argued that his leadership sparked a transformation in the team, guiding them to the World Cup semi-finals in 2018 and the Euro 2020 and Euro 2024 finals.
His approach offers valuable lessons for business owners aiming to lead their companies to success.
Cultivate a positive team culture
One of Southgate’s key achievements was creating a positive and inclusive team culture.
He prioritised team spirit and unity, understanding that a harmonious environment drives better performance.
This coming together is achievable in the world of accounting.
Creating opportunities for team members to collaborate on projects can lead to a stronger sense of camaraderie.
It can also lead to an innovative solution you may not have got through individual efforts.
Celebrating achievements is also important. Recognising good work from a team or individual will boost morale and motivate everyone to strive for excellence.
Lead by example
Southgate’s time as manager will be remembered for his integrity and professionalism, consistently demonstrating the behaviour he expected from his players.
As a business manager, this standpoint should also be adopted. Uphold the standards you set for others.
Demonstrating a strong work ethic, punctuality, and dedication will encourage your team to follow suit.
Be approachable and open to feedback. When your team feels heard and valued, they’re more likely to stay engaged and committed.
Provide continuous learning opportunities
Southgate invested in the development of his players, ensuring they had the skills and knowledge to succeed.
It may not have won England a trophy, but it did bring a sustained success that the national team had not had in arguably its entire history.
Establishing a culture of continuous learning in your business can lead to higher productivity and therefore success with your clients, as well as job satisfaction.
Encourage work-life balance
Understanding the importance of balance, Southgate often spoke about the mental well-being of his players.
As a leader, promoting work-life balance can prevent burnout and maintain productivity.
Consider offering flexible schedules or remote working options.
This flexibility can help team members manage their personal and professional lives more effectively.
Provide resources and support for mental health. Creating an environment where employees feel comfortable discussing their challenges can lead to a healthier, more productive team.
Set clear goals and expectations
Southgate’s success was partly due to his clear vision and the specific goals he set for his team.
As a leader in your organisation, clear communication of the firm’s goals plus regular meetings to review progress are key to keep your team on track and on the same page.
Grasp innovation
Under Southgate’s leadership, the England team was known for its adaptability and innovative strategies. Encourage your team to think outside the (penalty) box and embrace new ideas.
Create forums or regular brainstorming sessions where team members can share their ideas. Fresh perspectives can lead to improved processes and services.
Allow your team to experiment with new methods and technologies. This not only keeps the work interesting but can also lead to breakthroughs that benefit the company.
Football has also undergone a technology revolution in the last decade, with the introduction of systems like VAR and complex modelling used by coaching teams.
Just like England, you need to employ technology and reporting to get a clearer picture of your strategy, so you can spot those all-important goals early – rather than in the 90th minute.
Just as Gareth Southgate recognised the importance of having a strong support team to handle various aspects of football management, business owners need a strong range of services from their accountants to succeed.
We offer essential services such as bookkeeping, audits, tax planning, payroll management, and financial consulting.
These services ensure your business operates smoothly and remains compliant with regulations, allowing you to focus on strategic growth and innovation.
With a solid foundation in place, similar to a well-coached football team, your business can achieve its goals and thrive.
Gareth Southgate will look back on his time with England with the inevitable ounce of regret, but ultimately his leadership qualities have raised the standard of the team and got a nation dreaming again.
Now, we aren’t saying you should be shooting for silverware, but strong leadership can have an all-round positive effect on your team and raise the standards of your business.
Contact us today to learn how we can support your business.
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