Autumn Budget 2024: what you need to know

What you need to know about the Government’s spending and taxation plans.

The first Labour Budget since 2009 had been heavily signposted as one of tough decisions, spending cuts and tax hikes to plug a £40bn funding gap in the country’s finances inherited from the Conservatives.

But it’s also one that the new government promises will bring improvements to services like the NHS and investment to grow the economy.

Now, after months of speculation (and a speech that lasted one hour and 17 minutes), we finally know what Sir Keir Starmer and Rachel Reeves – the first-ever female Chancellor in the UK – have planned for the economy, and what they don’t.

Here are the policies that could make a difference to you and your finances.

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National Insurance up (in a way)

Employer National Insurance contributions increased

Labour promised no change to National Insurance, Income Tax or VAT – the taxes on working people. Though they’ve technically stayed true to this, in reality there will be some changes to the first one of these.

Both employers and employees pay National Insurance contributions (NICs) on salaries each month, and though there’s no increase to what comes out of our pay packet, there will be more required on how much employers contribute.

At the moment they pay 13.8% on your earnings over £175 per week. From April it’ll increase to 15%. 

They’ll also lower the threshold where this applies from £9,100 a year to £5,000 a year.

Reeves says this will eventually raise £28bn a year.

Though this won’t have an immediate impact on your pocket, it could do in time as the extra cost to the employer may be reflected in lower pension contributions or not as much room for pay increases.

Employment allowance increased

However, smaller businesses will see the level they have to start paying NICs for employers move from £5,000 to £10,500 a year. The government claims this means 865,000 businesses won’t pay any NICs at all, while half of businesses will see no change to what they contribute.

Income Tax & wages

Income tax thresholds freeze to end in 2028

The Income Tax thresholds were frozen until 2028 by the Conservatives in 2022 – and there were rumours Labour would be extending this. That would be bad news and effectively is a stealth tax hike as increased earnings will mean more people fall victim to ‘fiscal drag’.

However, from April 2028 these thresholds will increase in line with inflation.

Minimum wage up by 6.7%

In April 2025, the National Living Wage will go up to £12.21 an hour for over 21s, increasing from £11.44 an hour.

For 18-20 year olds the minimum wage will also go up, moving from £8.60 an hour to £10 an hour. This 16.3% is the largest increase for young people on record and is part of a gradual move so that statutory minimum pay is the same for all adults.

Apprentices will also see a hike, changing from £6.40 to £7.55 an hour.

Capital Gains

Capital Gains tax rates increase

There will be an increase to Capital Gains Tax (CGT), paid on profits when you sell assets like shares (outside of an ISA), second homes and other things worth more than £6,000.

For basic rate taxpayers this will move from 10% to 18%, while those on the higher rate will see GCT increase from 20% to 24%. This is above the £3,000 tax-free allowance.

The rates will stay the same on additional residential properties, already at 18% and 24%.

The changes take place from today, 30 October 2024.

This is lower than some reports suggested before the Budget (rumours suggested 20% and 40% in line with Income Tax), and the Chancellor says the new levels are still the lowest in any G7 economy.

Entrepreneurs’ Relief rates also up

The lifetime limit for Business Asset Disposal Relief (also known as Entrepreneurs’ Relief) will remain at £1million, but the 10% tax rate on this will gradually increase to 14% from 2025 and 28% from 2026.

Inheritance Tax

The freeze on thresholds before Inheritance Tax is due will be extended by two years to 2030. That means the first £325,000 left in an estate is tax-free, and it goes up to £500,000 if a home is passed to a direct descendent, and a further £1m if it’s passed onto a spouse.

But they will close the loophole that sees inherited pensions untaxed. That’ll change from April 2027 when they’ll form part of an estate.

Plus, from April 2026 the first £1m of business and agricultural income will continue to be free of Inheritance Tax. Above this there will be a 50% relief, meaning an effective rate of 20%.

There will also be a 50% relief on inheritance for all shares on the Alternative Investment Market, meaning an effective rate of 20%.

No change was announced to how long gifts could be made before death to count outside of Inheritance Tax. One rumour was this would change from seven years to 10, but it’s staying the same.

Benefits

Carers Allowance limits increased

The weekly earning limit will increase to 16 hours from April 2025, allowing carers to earn £10,000 a year but still be able to claim Carers Allowance.

Benefit debt repayment rate reduced

Universal Credit recipients who owe money on things like Council Tax and advance benefit payments will find the amount that can be taken off new payments each month limited at 15% rather than 25%.

Winter Fuel Payment changes going ahead

The targeting of Winter Fuel Payments for those who get Pension Credit will go ahead as planned, despite many calls that many of the most vulnerable will miss out.

Child Benefit won’t be based on household income

The way Child Benefit is calculated isn’t going to change. There were suggestions to base it on household income, rather than the income of individual parents, but that’s not going ahead.

Working parents can claim Child Benefit but if one of them earns over £60,000 they have to start paying it back on a sliding scale. If one earns £80,000, the charge is 100% so they pay back the entire benefit. 

Some suggested that basing it on household income would be more fair so a family won’t start losing the benefit until their combined income reaches £120,000 and they’ll have to earn £160,000 before they repay it completely.

But Labour isn’t going to reform Child Benefit because it would cost £1.4 billion by 2029-30 if the threshold was set between £120,000 to £160,000, to ensure no families would lose out.

Transport

No increase to fuel duty

Every year since 2012 has seen a freeze in fuel duty, except in 2022 when a temporary 5p cut was introduced. Though it was expected that could change, it’ll actually be frozen and the 5p will remain. This’ll be worth £60 per year to drivers.

Bus fare cap increases to £3

The £2 fare cap in England was due to finish at the end of the year, but it’ll now be extended – albeit at a higher price. So you’ll now pay a maximum of £3 on most bus trips (not all providers offer this) until the end of 2025.

Bus journeys in London will remain at a lower £1.75 and fares will remain at £2 in Manchester.

Rail fares to go up above inflation

On 2 March 2025, train fares will go up by 4.6%, which is one percentage point more than the RPI rate for July which is usually used.

Railcards could cost £5 more

Railcards currently cost around £30 a year and cut the cost of train tickets by a third. But the price of most could go up by £5, subject to industry approval. This excludes the disabled person’s railcard. 

Air Passenger Duty to rise

Air Passenger Duty (APD) hasn’t kept up with inflation, so the higher increases in this area are adjusting for this. 

In 2026-2027, APD will rise. You’ll pay £1 more for domestic economy flights, on top of the £7 duty currently; £2 more for economy short-haul flights, where APD is now £13; and £12 longer-haul destinations. The changes mean you’ll also pay a relatively higher tax for premium economy and business-class passengers. 

The higher rate for private jets will increase by 50%. Reeves states that this would be a rise of about £450 per passenger to California – a jibe at previous PM Rishi Sunak’s expense. There are plans to extend the higher rate so that it includes more private jets.   

Vehicle Excise Duty increased

Vehicle Excise Duty (VED) rates will rise in line with RPI from 1 April 2025. But for new cars there’ll be an even bigger hike to encourage people to electric and low emmission cars.

First-year rates for new cars (registered after 1 April 2025) will also change, starting with zero-emission cars, which currently pay £0, instead paying the a £10 rate each year until the 2029/2030 tax year.

Then you’re looking at £100 hikes for cars emitting 1 to 50g/km of CO2 and 51 to 75g/km to £110 and £130 respectively. And cars emitting 76g/km of CO2 and more will pay double the current rate for 2025-2026. 

Pensions

State Pension rises with Triple Lock

The State Pension Triple Lock will continue for this parliament. The basic and new State Pension will increase by 4.1% from April 2025, in line with wage growth.

That means the one in four pensioners on the full new State Pension a £470 boost. However those on the older basic State Pension or those who didn’t have enough National Insurance contributions to get the full amount will see a lower amount added on.

The Pension Credit Standard Minimum Guarantee will also increase by 4.1% from April next year. A single pensioner will get an extra £465 in 2025/26 while couples will get an additional £710.

No changes to tax relief or tax free allowances

A lot of the rumours ahead of the Budget revolved around changes to tax relief on their pensions. Whether that’d be good or bad is moot, as nothing was announced.

In addition, the tax-free amount people can claim when they retire remains at £250,000 and hasn’t been cut as speculated.

Savings 

ISA allowances frozen

There will be no change to the current £20,000 annual limit for new money added to ISAs each financial year, and that’ll remain the case until at least 2030.

To be fair £20,000 is a hefty allowance, so most people won’t be impacted by this. Indeed there was speculation that it could be reduced or a lifetime limit introduced – neither of which happened.

Help to Save extended

The Help to Save scheme will be extended by two years until April 2027. Plus, from April 2025 eligibility will extend to all working people on Universal Credit. This is a great way for low earners to start saving and get a 50% bonus from the government on up to £50 put aside each month.

Starting Rate for Savings frozen

Unsurprisingly, given that Income Tax thresholds haven’t changed, the eligibility limit for the Starting Rate for Savings will remain at £17,500.

No changes to LISA rules

Again, there was no change to LISAs, either in the limit on the property price where you could use your money, nor the penalty fee if you couldn’t use your savings for that purpose and wanted to withdraw your cash before you’re 60 years old.

Property

Stamp Duty up for second homes

The additional Stamp Duty on second homes, buy-to-let and commercial property will go up from 3% to 5% from 31 October 2024. So unless you completed today on an additional property, that’s an expensive cost you’ll have to pay.

There were no changes to Stamp Duty for your only property.

More homes to be built

The Government’s adding an extra £500 million to the Affordable Homes Programme to build an additional 5,000 affordable homes. It takes the total fund to £3.1 billion, the biggest annual budget for affordable housing in over 10 years. The plan is to build over 1.5 million affordable homes by the end of this parliament.

Right to Buy discount to be reduced

The Right to Buy scheme gives most council tenants the opportunity to buy their homes at a significant discount. 

The maximum discount you can get is £102,400 across England, and £136,400 in London boroughs, but it increases every April in line with the Consumer Price Index (CPI). The discount you get depends on how long you’ve been a council tenant, the type of property and its value.

The scheme’s been heralded as an amazing opportunity to help people who cannot afford their own homes to get on the property ladder. 

However, it’s also been criticised as a contribution to a lack of affordable housing as many properties bought through the scheme are now being privately rented and the social homes that have been sold have not been replaced. 

As announced in the Budget, Labour will reduce the discounts on the Right to Buy scheme to protect existing council homes and ensure people have access to the current stock of social housing  – although it’s not said when or by how much. 

Other taxes

Smokers and vapers face big tax hikes

There are some big increases for smokers. First Tobacoo Duty will continue to go up by RPI plus 2%. There will also be a 10% tax increase for hand-rolled tobacco. 

Vaping liquid will have a flat rate tax from 2026. This will be £2.20 per 10ml of liquid.

A similar one-off increase of £2.20 will apply to every 100 cigarettes or 50g of tobacco so there’s still a clear difference between smoking and vaping.

Soft drink duty increases

This sugar tax will increase to keep up with inflation.

Tax cut for draft beer

There will be a 1.7% cut on draft duty in pubs for beers under 8.5% – rather than increase in line with inflation. This works out as 1p off an average strength pint from 1 February 2025.

Private school fees

From 1 January 2025 private schools will have to pay 20% VAT. The Government’s also removing business rates charitable relief from private schools in England from April 2025.

There’s been plenty of criticism of this decision in the run-up to the Budget including concerns it will lead to a mass exodus of children from the private school sector, should fees increase, which could overwhelm state schools. However, the Government says the impact is expected to be very small.

Other announcements

Obviously we’re a personal finance site, so we’re only looking at those announcements, rather than the bigger economic and business policies and changes from today. But there are a couple of other things worth mentioning.

• The inflation target will stay at 2%
• GB Energy will be set up to increase the UK’s green energy infrastructure
• Triple funding for school breakfast clubs
• Interest on unpaid tax will in increased
• Non-dom tax status removed
• £1.8bn compensation fund for victims of the Post Office scandal
• £11.8bn in compensation fund for victims of the infected blood scandals
• Windfall tax on energy firms will increase to 38% and run until 2030
• From 2026 there will be lower tax rates for retail, hospitality and leisure businesses