Latest News
Autumn Budget 2024: 4 Key Points You Need to Know
On 30th October 2024, Chancellor Rachel Reeves stood outside 11 Downing Street with the red box – the first woman to ever do so – before heading over to the House of Commons to present this year’s Autumn Budget.
This Budget was a big one, aimed at putting “more pounds in people’s pockets”, managing debt, and investing in healthcare, education, and infrastructure. It includes plans to raise taxes by £40 billion, the largest hike proportionally since 1993.
If you’re wondering about how these changes might impact you, let the financial experts at Lester Brunt be your guide. Read on for a clear breakdown of the major announcements from this year’s Autumn Budget and what they could mean for your finances.
1. Inheritance Tax (IHT) Reforms
The Chancellor has also introduced changes to inheritance tax (IHT) with the goal of raising around £3 billion for the government. Here’s an overview of what’s changing:
- The inheritance tax thresholds, which have been frozen since 2009, will now stay the same until 2030. This means the nil-rate band remains at £325,000, and the residence nil-rate band at £175,000. This gives married couples or civil partners a combined tax-free allowance of up to £1 million when passing on their estate to direct descendants.
- Farms and business assets over £1 million will face a new 20% IHT levy. Some farmers and business owners have voiced concerns that this could put pressure on family-run enterprises, possibly forcing them to sell assets, which could impact local food production and increase reliance on imports.
- Previously, most Alternative Investment Market (AIM) stocks were fully exempt from IHT if held for over two years. From April 2026, a new £1 million threshold for combined business and agricultural assets will apply, below which no IHT will be charged. Additionally, a new 50% IHT relief on AIM shares and similar assets will bring the effective tax rate to 20%.
While these changes are intended to boost government revenue, they’ve sparked concern about their possible effects on family businesses and the agricultural sector.
Steps to take: Review your assets, including any business or agricultural holdings, to see if they exceed the new thresholds. You might want to explore options for restructuring ownership or available reliefs to help reduce potential tax liability. If you hold AIM shares or similar investments, take a look at how the new 50% relief could affect your portfolio.
2. Income Tax Threshold Freeze Continued Until 2028
To help ease the burden of inflation and rising living costs, the Chancellor announced several changes to personal income tax bands. Here are the current income tax thresholds for 2024/25:
- Personal Allowance: Up to £12,570 (income up to this amount is tax-free)
- Basic Rate (20%): £12,571 to £50,270
- Higher Rate (40%): £50,271 to £125,140
- Additional Rate (45%): Over £125,140
Since 2021, these thresholds have stayed the same. This freeze has led to “fiscal drag”, whereas wages rise over time, more people are pulled into higher tax brackets without any increase to the thresholds. Essentially, people end up paying a bigger portion of their income in tax, even if they’re not actually better off.
The Chancellor has now extended this freeze on tax thresholds until April 2028. After that, they’ll be adjusted annually in line with inflation to keep up with the cost of living.
This future change is aimed at reducing the impact of fiscal drag, making sure tax bands grow alongside inflation and providing taxpayers with some breathing room.
Steps to take: If you’re close to moving into a higher tax band, now’s a good time to review your tax planning strategy. Small changes can impact your take-home pay, so a little planning now could make a big difference later.
3. Employment Allowance, National Insurance, and Minimum Wage Updates
The Chancellor also announced several changes that could affect SMEs in the coming years:
- The Employment Allowance will go up from £5,000 to £10,500, which means that around 65,000 small businesses won’t need to pay National Insurance Contributions (NICs) anymore. Over a million will see no increase in what they pay. (HM Revenue and Customs, Changes to the Class 1 National Insurance Contributions Secondary Threshold, the Secondary Class 1 National Insurance contributions rate, and the Employment Allowance from 6 April 2025, 13/11/2024).
- Employers’ NICs will increase from 13.8% to 15% starting April 2025. This measure is part of the government’s strategy to raise £25 billion annually.
- The National Minimum Wage will increase to £12.21 per hour for adults over 21 from April 2025. For 18-20-year-olds, it will rise from £8.60 to £10, and apprentice wages will go from £6.40 to £7.55 per hour.
While the increase in Employment Allowance offers some relief to SMEs, the rise in employers’ NICs and the higher National Minimum Wage may present additional financial challenges.
Steps to take: If you’re an SME owner, assess how the NIC increase and new wage rates could impact your payroll, and consider ways to adjust your budget where possible. The higher Employment Allowance can offset some of these costs, so remember to factor that into your calculations.
4. Changes to Tax Relief for Private Schools
The government has announced updates to the tax arrangements for private schools, aimed at promoting fairness in education and increasing public funding for state schools:
- Starting on 1st January 2025, a 20% VAT will be applied to private school fees, which is expected to generate between £1.3 and £1.5 billion each year, according to estimates by the Education Department.
- From April 2025, private schools in England that currently receive an 80% reduction in business rates due to their charitable status will no longer qualify for this relief. This change is also expected to boost public revenue, with further details on the exact figures to come.
These adjustments are part of the government’s wider commitment to balancing resources within the education system and supporting public schools. The additional revenue raised will be directed toward recruiting 6,500 new teachers and increasing state school budgets by 2%, according to Labour’s Fiscal Plan.
While the new VAT will likely mean higher fees at private schools, some schools, like Eton College, have already indicated they will pass the 20% increase onto parents, raising annual fees from £52,749 to around £63,300 (BBC, 31/8/2024) . This could lead a small percentage of private school students – estimated at 3% to 7% (Department for Education, VAT on private schools: Everything you need to know, 1/11/2024) – to transition to state schools, potentially adding up to 60,000 pupils to the public sector (Department for Education, VAT on private schools: Everything you need to know, 1/11/2024). This shift may create additional costs for the government, projected between £100 million and £300 million (Department for Education, VAT on private schools: Everything you need to know, 1/11/2024), but would still result in an overall net revenue gain.
Steps to take: Families with children in private schools should prepare for potential fee increases. It might be worth exploring new financial planning strategies if this change affects your budget – take a look through our guide for some good options.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any is greatly dependent in individual circumstances.
Chart Your Financial Course with Lester Brunt
If the recent Budget changes might affect you and you’re unsure of your next steps, Lester Brunt’s financial specialists are here to support you. We offer a wide range of financial planning services and can guide you through all the steps we’ve outlined above, as well as other strategies to help you make the most of your money and secure your future. Our services include:
No matter your financial situation or goals, we’re here to help you navigate changes and feel confident in your financial future.
Book a no obligation confidential consultation online or give us a call on 01202 695 801 to get started.
Written By Michael Lester
Financial Adviser
Lester Brunt Wealth Management
Lester Brunt Wealth Management is a trading name of Lester Brunt Wealth Management Ltd
Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, product or services by us or St. James’s Place.