UK Budget 2024: Key Takeaways You Need to Know

October 31, 2024

In their first Budget since regaining power, Labour has introduced significant tax changes to support the NHS and public services. Here’s a breakdown of the main measures announced by Chancellor Rachel Reeves.

Budget Overview

Chancellor’s Message: Rachel Reeves emphasized this Budget as a one-off necessity for funding critical services.
Tax Increase: Tax rises totalling £40bn will go towards supporting the NHS and other essential services.

How This Budget Impacts You

Personal Taxes

Income Tax and National Insurance (NI): Rates will remain the same, as will VAT. Starting in 2028, income tax bands will rise with inflation, avoiding “bracket creep” for many taxpayers.
Capital Gains Tax: The basic rate on profits from selling shares will increase from 10% to 18%, and the higher rate will rise from 20% to 24%.
Inheritance Tax: The current threshold freeze will continue until 2030, and unspent pension pots will be taxed from 2027. From 2026, exemptions for inheriting farmland will be reduced.

Business Taxes

Employer National Insurance: The rate on salaries over £5,000 will rise to 15% from April, expected to generate an additional £25bn per year.
Support for Small Businesses: The employment allowance, which helps small businesses reduce NI, will increase to £10,500.
Corporation Tax: The main rate for profits over £250,000 will stay at 25% until the next election.

Wages, Benefits, and Pensions

Minimum Wage Increase: For over-21s, the minimum wage will rise to £12.21 per hour in April, while rates for 18- to 20-year-olds will go up to £10.
Pension and Benefits: State pensions will see a 4.1% rise, benefiting from the “triple lock.” Carer’s allowances will also expand as eligibility is widened.

Transport and Infrastructure

Fuel Duty: The 5p cut on petrol and diesel duty, introduced by the previous government, will stay for another year.
Bus Fares: Outside London and Manchester, single bus fares capped at £2 will increase to £3 starting in January.
Rail Projects: Labour has committed to advancing the Transpennine upgrade and tunnelling for HS2 to reach London Euston.
Air Travel Tax: Starting in 2026, Air Passenger Duty will rise by £2 for short-haul and £12 for long-haul flights. Private jet taxes will also increase by 50%.

Drinking and Smoking

Vaping Tax: A new flat rate of £2.20 per 10ml of vaping liquid will begin in October 2026.
Tobacco Tax: Tax on tobacco will increase by 2% above inflation, and hand-rolling tobacco by 10%.
Alcohol Duty: Tax on non-draught alcoholic drinks will increase in line with RPI inflation, but tax on draught drinks will decrease by 1.7%.

Public Services and Government Spending

NHS and Education: Spending on the NHS and schools will rise by 4.7% this year.
Defence and Local Councils: Defence spending will increase by £2.9bn, while local councils will receive an extra £1.3bn and keep revenue from Right to Buy sales.

Housing

Social Housing: Providers can raise rents above inflation, while discounts for Right to Buy tenants will be reduced.
Stamp Duty: From April, the threshold for paying stamp duty on main homes will drop from £250,000 to £125,000, reversing an earlier cut. First-time buyers will also see this threshold decrease from £425,000 to £300,000.

Economic Predictions

Growth and Inflation: The Office for Budget Responsibility (OBR) predicts 1.1% growth this year, rising to 2% in 2025. Inflation is forecast to drop to 2.3% by 2026.
Government Debt: The official definition of debt now includes a broader range of financial assets. The Budget policies are expected to increase UK borrowing by an average of £32.3bn over the next five years.

This Budget introduces major changes to taxes, social spending, and infrastructure, shaping Labour’s economic approach in its first year back in office.