Chancellor Rachel Reeves presented Labour’s first Budget since 2010, focusing on notable tax increases to support public services and stabilise the economy.
This Budget introduces significant updates targeting wealth accumulation and estate transfers, leading to higher contributions expected from businesses, investors, and top earners.
In this Budget 2024 summary, we start by looking at the key points and changes impacting those with wealth and assets.
Subsequently, we then take a look at each area of the Budget in a bit more detail.
Please remember, that the information provided here is for general understanding and not intended as financial advice.
Budget 2024 summary at a glance – key points
Here is a short summary of the key points in the Budget 2024.
These changes will mainly impact investors, businesses and those who have accumulated and are looking to preserve wealth.
Capital Gains Tax increases
Capital gains tax on profits from selling shares and other non property assets will increase.
The basic rate of CGT is rising from 10% to 18% and the higher rate from 20% to 24%.
This change will particularly impact investors with substantial assets and portfolios.
National Insurance for employers
From April, employers’ National Insurance will go up to 15% for salaries above £5,000, adding to business costs and government revenue.
There is a thought that this will lead to wage stagnation, and recruitment decisions due to rising staff costs.
Changes to inheritance tax in the Budget
The IHT threshold freeze is, as expected, extended to 2030. Unspent pension pots are now set to be subject to IHT from 2027, impacting estate planning. Agricultural relief is also set to change.
Budget 2024 pension announcements
The previous changes to lifetime pension allowances will reduce the tax efficiency and advantages on large pension pots. This will affect long-term wealth planning due to the above changes to IHT. Other changes to the State Pension are mentioned below.
Corporation Tax & private equity tax
The main corporation tax rate will remain at 25%, but taxes on private equity profits will rise to 32%. This adjustment is expected to influence investment gains in the private equity sector.
Freeze on income tax thresholds
Although income tax rates remain unchanged for now, thresholds will adjust only with inflation after 2028. As a result, indirectly affecting those with growing incomes as they may enter higher tax bands over time. In the meantime, to summarise, as wages rise due to inflation, people may find themselves paying more taxes.
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Budget 2024 – a breakdown of the key bullet points
Now let’s take a look at the rest of the changes announced in today’s Budget covering:
- Personal taxes and wealth
- Business tax
- Wages benefits and pensions
- Transport and the environment
- Public spending
Changes to personal taxes and wealth
The Budget brings several significant changes that will influence personal taxation and wealth management.
Key areas affected include capital gains, inheritance planning, and income tax allowances, which are expected to shape how individuals approach their financial strategies moving forward.
Income Tax
- No changes to current income tax rates or National Insurance (NI) paid by employees, nor to VAT.
- Income tax thresholds will increase with inflation starting in 2028, aiming to prevent “fiscal drag” where wage increases could push individuals into higher tax bands.
As a result of these changes, investors are considering tax efficient options and are exploring whether VCTs are a good investment to reduce income taxes in addition to pensions, and ISAs.
Capital Gains Tax
- The basic capital gains tax (CGT) on profits from share sales will increase from 10% to 18%, while the higher rate will rise from 20% to 24%.
- Gains from additional property sales will retain their current rates.
- The main Capital Gains Tax rate for trustees and personal representatives is rising from 20% to 24% for disposals made on or after 30 October 2024.
- The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% for disposals on or after 6 April 2025, and then from 14% to 18% for disposals on or after 6 April 2026.
Related reading: The most tax efficient investments for higher rate taxpayers
Inheritance Tax (IHT)
- The IHT threshold freeze is extended until 2030, while unspent pension pots will be subject to IHT from 2027.
- Exemptions for inheriting farmland will become more restrictive from 2026.
Business tax changes in today’s Budgeti
Business taxation changes were central to this year’s Budget, particularly through adjustments to National Insurance and tax treatment of private equity gains.
National Insurance for employers
- Employers’ NI will rise to 15% for salaries over £5,000 starting in April, up from the current 13.8% on earnings over £9,100, contributing an estimated £25 billion annually.
- The Employment Allowance, benefiting smaller businesses by reducing their NI liability, will increase from £5,000 to £10,500.
Corporation Tax and private equity
- The main corporation tax rate remains at 25% for profits over £250,000, while taxes on profits from private equity deals will rise to a maximum of 32%.
Wages, benefits, and pensions – what’s changed?
The Chancellor stated that today’s Budget aims to emphasise wage growth for lower-income individuals and make adjustments to state benefits to help tackle the rising cost of living.
- The legal minimum wage for workers over 21 will rise from £11.44 to £12.21 per hour from April, aligning with the government’s “Plan to Make Work Pay.”
- State pension payments will rise by 4.1% next year, benefiting from the “triple lock” policy, which outpaces general working-age benefit increases.
Transport and the environment
Environmental initiatives and transport adjustments are notable in this Budget.
There is a continued focus on incentivising green energy and sustainable travel.
- The 5p fuel duty cut on petrol and diesel, initially scheduled to end in April 2025, will be extended for an additional year.
- New regulations include an increased Air Passenger Duty for private jet flights, and Vehicle Excise Duty for less efficient new petrol vehicles will double in the first year to promote electric vehicle uptake.
Public spending and infrastructure
Investments in public services and infrastructure remain a cornerstone of the 2024 Budget, particularly in health, education, and defence.
- NHS funding will see an additional £22.6 billion for day-to-day operations in England, with £3.1 billion set aside for infrastructure and investment.
- Education will receive £6.7 billion next year, with £1.4 billion designated for rebuilding projects across over 500 schools.
- Defence spending is set to increase by £2.9 billion to support national and international commitments.
Other changes announced in the Budget 2024
Some other additional measures address housing affordability, economic forecasting, and financial oversight.
Housing
- Social housing providers can increase rents above inflation under a new multi-year settlement.
- Stamp duty on second homes will increase from 3% to 5%, aiming to address housing affordability issues.
Economic outlook
- The Office for Budget Responsibility projects GDP growth of 1.1% this year and 2% in 2025, with inflation anticipated to drop to 2.3% by 2026.
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