Business
Budget 2024: The key announcements in Chancellor Rachel Reeves’s speech
Chancellor Rachel Reeves has finally unveiled the budget for 2024. Here are the key points:
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• The budget raises taxes by £40bn.
• National Insurance contributions for employers (not employees) will increase by 1.2 percentage points to 15% from April 2025.
The point at which employers start paying NI will fall from £9,100 a year to £5,000 a year. This will raise £25bn per year.
• The lower rate of capital gains tax (CGT) on the sale of assets will increase from 10% to 18%. The higher rate will go from 18% to 24%. CGT on the sale of residential property will also increase from 18% to 24%.
• Tax thresholds will rise, meaning the point at which people pay higher taxes will be increased. These tax bands had been frozen. But this freeze will end in 2028 and the bands will increase at the rate of inflation.
• The freeze on inheritance tax will continue for a further two years until 2030. This means the first £325,000 can be inherited tax-free, rising to £500,000 if the estate is passed to direct descendants, and £1m if it’s passed to a surviving spouse or civil partner.
• From tomorrow the stamp duty surcharge for second homes, or ‘higher rate for additional dwellings’, will increase by two percentage points to 5%.
• Health and employment services for people who are disabled and long-term sick will get £240m in funding.
• The minimum wage for people 21 and over will rise by 6.7% to £12.21 an hour. This is the equivalent of £1,400 a year for a full-time worker. Workers aged 18 to 20 will see their minimum wage increase by 16.3% to £10 an hour.
• People will now be able to earn £10,000 or more while claiming Carers Allowance. This will mean an extra £81.90 for those newly eligible.
• The household support fund will receive £1bn to help those in financial hardship with the cost of essentials.
• A new fair repayment rate will mean Universal Credit claimants who have been accidentally overpaid will only have to pay back 15% of their allowance each month, falling from 25%. This means a gain of around £420 a year for roughly 1.2 million of the poorest households.
• Businesses will get an increase in employment allowance, which will mean 65,000 employers won’t pay any National Insurance at all next year with the allowance growing from £5,000 to £10,500. This will mean more than a million businesses will pay the same or less than they did previously.
• Business rates relief will fall from the current 75% down to 45% for retail, leisure and hospitality businesses.
• The day-to-day NHS budget will increase by £22.6bn. There will also be a further £3.1bn investment in its capital budget.
• This will facilitate 40,000 extra hospital appointments and procedures every week and will include £1.5bn for new hospital beds.
• Local government will receive funding worth “at least” £600m for social care.
• An investment of £5bn in housing, which will increase the affordable homes programme to a budget of £3.1bn.
• In addition, £1bn will be spent on the removal of dangerous cladding, implementing the findings of the Grenfell inquiry.
• Fuel duty will be frozen this year and next, with the existing 5p cut maintained.
• A cut to draft alcohol duty of 1.7%, which could make drinks cheaper by 1p.
• The tax on tobacco will rise at the rate of inflation plus an additional 2%. There will also be an extra 10% on rolling tobacco.
• There will be a new flat rate duty on all vaping liquid from next October.
• VAT will be introduced on private school fees from January 2025 and business rates relief for private schools will be removed from April 2025.
• Some 500 state schools that are old and not fit for purpose will be rebuilt at a total cost of £1.4bn. There will be an extra £300m for school maintenance each year, which will cover dealing with RAC concerns.
• The budget for free school breakfast clubs will be tripled to £30m, in 2025 and 2026. The core budget for schools will also rise by £2.3bn next year.
• An investment of £300m for further education and £1bn for children with special educational needs (SEN).
• The HS2 rail link between Old Oak Common in west London and Birmingham has been confirmed. Tunnelling work will also begin on extending the line to London Euston.
• Air passenger duty on private jets will rise by 50%, which is the equivalent of £450 per passenger.
• The energy profits levy on oil and gas companies will increase to 38% until March 2030.
• The annual defence budget will fall below 2.5% of GDP next year – with an increase of £2.9bn for the Ministry of Defence.
• A commitment of £3bn a year for Ukraine for “as long as it takes”.
• Public finances will be in surplus, rather than in deficit, by the 2027-2028 financial year. The government claims this means reaching stability two years earlier than planned.
• The Office for Budget Responsibility (OBR) predicts UK GDP growth to be 1.1% in 2024, 2.0% in 2025, 1.85% in 2026, 1.5% in 2027, 1.5% in 2028, 1.6% in 2029.
• The OBR expects public sector net borrowing to be £105.6bn in 2025-26, £88.5bn in 2026-27, £72.2bn in 2027-28, £71.9bn in 2028-29 and £70.6bn in 2029-30.
• Consumer price index (CPI) inflation will hit 2.5% this year, according to OBR forecasts. Next year it will rise to 2.6% before falling to 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029. It’s the goal of the Treasury to bring inflation down to 2%. The Bank of England has raised interest rates to bring the rate of price rises to 2%.
• The price of soft drinks will rise, with an increase to the drinks levy in line with inflation every year. Nearly £1bn a year will be raised thanks to the measure.
• All government departments will have their budgets reduced by 2% next year. This will be achieved by “using technology more effectively and joining up services across government”.