Cutts & Co Accountancy – Autumn Budget Overview 2024

Chancellor Rachel Reeves’ Autumn Budget: Rebuilding Britain’s Economic Stability and Public Services

Chancellor Rachel Reeves has delivered a comprehensive Autumn Budget, setting out a clear path to economic recovery and national renewal. With a focus on protecting public services, raising living standards, and ensuring fiscal stability, this Budget tackles both the immediate challenges and lays down the groundwork for future growth. Here’s an in-depth look at what the Budget means for public spending, business and individual tax policies, and the government’s ambitious plans for a stronger Britain.

Health and Social Care

The NHS will receive an additional £22.6 billion over two years to help cut waiting lists, with a target to enable an extra 40,000 elective appointments per week. Key investments include:

• £1.5 billion for surgical hubs and new beds, which will reduce emergency department crowding and bring more care into communities.
• £100 million for 200 GP estate upgrades, allowing for more efficient use of existing healthcare facilities to increase appointment availability.

Education and Skills

Education receives a vital boost with £4 billion, supporting projects aimed at modernising and securing facilities for future generations:

• Core school funding will increase per-pupil investment, and £2.3 billion will go to schools for immediate improvements in infrastructure and safety.
• School rebuilding receives £1.4 billion, funding upgrades across 100 schools and paving the way for a safer, more modern learning environment.
• To tackle the skills gap, Skills England will be established, ensuring a workforce capable of driving the UK’s economic growth forward.

Economic Stability and Support for Working Families

The Chancellor has committed to protecting living standards and supporting the workforce with targeted measures, especially amidst economic challenges:

• Fuel Duty freeze is extended for another year, saving car drivers an average of £59 annually, and larger savings for vans and HGVs.
• The Carer’s Allowance earnings limit will rise, benefiting over 60,000 carers who balance work with caregiving.

Business and Wealth Tax Adjustments

While working families are protected from tax increases on income, VAT, and National Insurance, the Budget introduces new measures for businesses and the wealthiest:

• National Insurance Contributions for employers – From April 2025, employers’ National Insurance Contributions (NICs) will increase from 13.8% to 15%, meaning businesses will pay more on earnings above the threshold for each employee.Additionally, the threshold at which employers start paying NICs will drop from £9,100 to £5,000. This change means employers will pay NICs on a larger portion of each employee’s salary, impacting overall payroll costs. The adjustment aims to increase revenue from businesses, especially for those with higher payroll expenses, to fund public services while avoiding additional tax burdens on employees’ payslips.

Additional Revenue Measures

• Stamp Duty: The surcharge for Additional Dwellings rises from 3% to 5%, providing a boost for first-time buyers and those moving homes, while making it tougher for second-home buyers and landlords. This measure increases the higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties by individuals and purchases of residential properties by companies.The measure also increases the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%.
• VAT on Private Education: From 1 January 2025, a new 20% VAT will apply to private school fees, with charitable rate relief removed from April 2025. This aims to increase education funding and support wider commitments to youth.
• HMRC Crackdown: HMRC will focus on reducing the UK’s tax gap, aiming to recover £6.5 billion annually over the next five years, which will directly support public services and economic stability.
• National Living Wage – The National Living Wage will increase from £11.44 to £12.21 an hour from April 2025, which means a pay boost for 3 million workers. The 6.7% increase – worth £1,400 a year for a full-time worker – is a significant move towards delivering a genuine living wage.  The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour.

Major Investment in Infrastructure for Long-Term Growth

The government is committing £100 billion over the next five years to infrastructure projects, laying the foundation for economic growth:

• Local Road Maintenance: An additional £500 million for road repairs is expected to exceed the target of 1 million potholes annually, bringing total investment in England’s roads to nearly £1.6 billion.
• Affordable Housing: The Affordable Homes Programme’s budget increases to £3.1 billion, supporting both the private housing market and affordable housing access.
• Digital Infrastructure: Project Gigabit and the Shared Rural Network receive over £500 million to expand high-speed digital connectivity, vital for underserved areas and boosting the digital economy.

Long-Term Fiscal Responsibility and Stability

The Budget introduces a series of reforms to ensure long-term fiscal health:

• The Corporate Tax Roadmap caps the corporation tax rate at 25%, aiming to create a competitive environment for businesses.
• Fiscal Rules: The stability rule requires balancing the current budget, and the investment rule mandates reducing national debt relative to GDP. The government expects to meet both by 2027-28, setting a strong framework for sustainable spending.

Business Rate Reforms and Economic Growth

• Business Rates Relief: A 40% relief on business rates will be available to retail, hospitality, and leisure sectors, capped at £110,000 per business, with one-third of properties exempt from rates due to Small Business Rates Relief. This relief package is valued at nearly £2.4 billion over the next five years.
• Investment in SMEs: The Budget includes £3 billion in additional support for SMEs and expands the housing guarantee scheme to foster a diverse housing market and business growth.

Additional Measures to Tackle Cost of Living and Public Health

To address inflation and public health, the government will:

• Maintain the tobacco duty escalator and introduce a vaping tax in 2026, supporting healthier alternatives and raising revenue.
• Alcohol Duty: Pubs will benefit from a freeze on draught duty, with small breweries seeing increased relief, supporting British pubs and businesses.
• Soft Drinks Industry Levy will see incremental increases to address health concerns associated with sugar consumption.

Upcoming Reforms to Ensure Fairness in Taxation

Future-focused reforms address fairness and reduce tax avoidance:

• Residence-Based Regime: The Non-Dom regime will transition to a residence-based system in 2025, generating £12.7 billion according to the Office for Budget Responsibility (OBR).
• VAT on Private Schools: A 20% VAT will apply to private school fees from 2025, and charitable rate relief will be removed, raising significant funds for public services.
• HMRC Enhancements: Overhauls to the HMRC IT and compliance systems aim to close the UK’s tax gap, projected to raise an additional £6.5 billion per year for public services.

Looking Ahead

Chancellor Reeves’ Budget outlines a clear path to rebuilding Britain’s infrastructure, enhancing public services, and safeguarding economic stability. Through decisive investments in health, education, housing, and public safety, this Budget sets the groundwork for a decade of renewal. With fiscal reforms and targeted tax measures, the government balances increased public spending with a stable framework for growth, ensuring that businesses, the wealthy, and key sectors contribute to the nation’s recovery.

For tailored advice on how these changes may affect you or your business, contact Cutts & Co Accountancy.