The Chancellor’s Autumn Budget 2024 has been unveiled, presenting a comprehensive plan to fix the foundations of the economy, protect working people, and rebuild Britain.
Personal Finances
One of the most significant changes is the increase in the National Living Wage (NLW). Over three million low-paid workers across the UK will see their hourly wage rise by 6.7% to £12.21 from April 2025, resulting in an annual earnings increase of more than £1,400 for full-time workers. This boost enhances the purchasing power of workers earning the least, allowing them to afford necessities more comfortably and potentially stimulating consumer spending, which benefits the overall economy.
However, while the wage increase provides significant benefits to workers, it may also impose higher costs on employers, especially small businesses. This could lead to increased prices for goods and services as businesses adjust to cover higher labour expenses. Some employers might also reconsider their staffing levels or reduce working hours to manage the increased wage bill, which could impact employment opportunities.
The government intends to create a single adult wage rate, gradually closing the gap between the NLW and the National Minimum Wage (NMW) for younger workers. From April 2025, the NMW for 18-20-year-olds will increase by 16.3% to £10.00 per hour, the largest ever increase for this age group. Nearly 200,000 young people across the UK will benefit, with an annual earnings boost of over £2,500 for full-time workers.
In addition to wage increases, the government is extending the Household Support Fund with an additional £1 billion allocated for 2025-26. Local authorities will use these funds to assist vulnerable households with essentials like food, utilities, and housing costs. This targeted fiscal policy aims to alleviate income inequality and prevent vulnerable individuals from falling into severe poverty. By supporting those with a higher marginal propensity to consume, the measure can have a multiplier effect, boosting economic activity in local communities.
Carers are also receiving attention in the new Budget. The Carer’s Allowance earnings limit is being increased to the equivalent of 16 hours at the NLW, allowing carers to earn more each week without losing their allowance. This is an increase of £45 per week and will allow over 60,000 more carers to access Carer’s Allowance. This change provides greater financial security and flexibility, enabling carers to work additional hours if they choose. By incentivizing carers to participate more in the workforce, the economy benefits from increased productivity while carers gain improved financial well-being.
Cost of Living and Everyday Expenses
Addressing the cost of living, the government is implementing measures that directly affect everyday expenses. The fuel duty is being frozen, and the temporary 5p per litre cut is extended for another year. For the average driver, this means a saving of £59 in 2025-26, easing the cost of commuting and travel. Additionally, the government is accepting recommendations to increase transparency in fuel pricing, potentially reducing pump prices further by encouraging competition between forecourts.
Vehicle Excise Duty changes are also on the horizon. Incentives for electric vehicles (EVs) are being strengthened by extending the 100% first-year allowances for zero-emission cars and EV charge points. While EVs benefit from lower taxes, hybrids and internal combustion engine vehicles will see increased costs. These measures aim to shift consumer behaviour towards more sustainable options, addressing environmental concerns and promoting cleaner transport methods.
However, these measures may also place an additional financial burden on those who cannot yet afford electric vehicles, particularly in areas where EV infrastructure is still developing. Consumers reliant on traditional vehicles may face higher costs without immediate alternatives, which could strain household budgets.
Purchasing a second home or buy-to-let property will become more expensive due to an increase in the Higher Rates for Additional Dwellings of Stamp Duty Land Tax from 3% to 5% effective 31 October 2024. This change could deter some from investing in additional properties, potentially easing competition in the housing market and making it more accessible for first-time buyers. It’s expected to result in 130,000 additional transactions over the next five years by first-time buyers and those purchasing a primary residence.
The Right to Buy scheme, which allows council tenants to purchase their homes at a discount, is undergoing adjustments. The government is reducing the maximum discounts available to tenants, meaning those looking to buy their social housing will receive less financial incentive. For tenants, this could make home ownership less accessible, particularly for those with limited savings or lower incomes, as they may need larger mortgages or deposits.
However, the reduction in discounts is intended to balance the desire to promote home ownership with the need to preserve the availability of social housing for those in need. By limiting the number of social homes sold at significant discounts, the government aims to maintain the existing social housing stock. This ensures that vulnerable individuals and families have access to affordable housing options. The change is part of a broader strategy to address long-term housing availability issues and support those on waiting lists for social housing.
Starting February next year, alcohol duty on draught products will be cut by 1p per pint. This supports the hospitality industry and offers a slight price reduction for consumers enjoying a pint at the pub. While the impact may be modest, it provides some relief to an industry recovering from challenging times.
Conversely, smokers will face higher costs due to the renewal of the Tobacco Duty escalator, increasing duty by inflation plus 2%, with an additional 10% on hand-rolling tobacco. A new Vaping Products Duty will be introduced from October 2026 at a flat rate. These measures use taxation to influence consumer behaviour, aiming to reduce consumption of products with negative health impacts and improve public health outcomes.
However, these increased costs may significantly impact smokers, particularly those from lower-income backgrounds, who may find it financially challenging to afford higher prices but struggle to quit due to nicotine addiction. Without adequate support for smoking cessation, these measures could place additional financial strain on vulnerable individuals.
Enhancements to Public Services and Infrastructure
Enhancements to public services and infrastructure form a significant part of the Budget. The National Health Service (NHS) will receive an additional £22.6 billion from 2023-24 to 2025-26. This investment aims to reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week, making progress towards the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment.
Significant capital investment is also being made to address maintenance backlogs and improve facilities, including over £1 billion to tackle reinforced autoclaved aerated concrete (RAAC) in hospitals and £70 million for new radiotherapy machines. The government is committed to a 10-Year Health Plan focusing on three shifts: moving care from hospital to community settings, transforming the NHS from analogue to digital, and shifting from a model of sickness to prevention.
The Department for Education will see resource spending increase by £11.2 billion from 2023-24 levels by 2025-26. This includes:
- Increasing funding for the core schools budget by £2.3 billion, with £1 billion allocated to support the special educational needs and disabilities (SEND) system.
- Allocating an additional £1.8 billion to expand government-funded childcare, supporting young children with high-quality early education.
- Providing an additional £300 million for further education (FE) to ensure young people develop the skills they need.
The government is also investing £6.7 billion in capital funding for education in 2025-26, including £1.4 billion for the school rebuilding programme and over £2 billion for maintenance of schools.
However, changes to private school taxation may impact some families. From 1 January 2025, a 20% VAT will be introduced on education and boarding services provided by private schools. Additionally, the removal of charitable business rates relief from private schools in England from April 2025 will increase the cost of private education. These measures are expected to raise £1.8 billion per year by 2029-30. The government aims to use these funds to invest in state education, ensuring every child has access to high-quality education.
Families who currently send their children to private schools may face higher costs, which could strain household finances or force some to consider alternative schooling options. This could also result in increased pressure on state schools if there is an influx of students transferring from private to public education.
Taxation Changes and Their Impact
Taxation changes in the Budget have broad implications. The increase in Capital Gains Tax (CGT) rates means individuals selling assets like stocks, property, or businesses may face larger tax bills on their profits. From 30 October 2024, the main rates of CGT will increase to 18% and 24% for lower and higher rates, respectively. This change may influence investment decisions, potentially discouraging the sale of assets or prompting investors to hold assets longer.
Inheritance Tax reforms include extending the freeze on tax-free thresholds until April 2030. Additionally, from April 2026, reliefs for agricultural and business property will be reformed. The first £1 million of combined agricultural and business assets will continue to receive 100% relief, with a 50% rate thereafter. The government is also bringing unspent pension pots into the scope of inheritance tax from April 2027, affecting around 8% of estates each year. These measures aim to make the tax system fairer by ensuring that wealthy estates contribute more to the public finances.
The Autumn Budget 2024 has maintained the current income tax thresholds, extending the freeze on the personal allowance and higher rate threshold until April 2028. This means that the amount of income you can earn before paying income tax (the personal allowance) and the point at which you start paying the higher 40% rate of income tax remain unchanged. As wages increase due to inflation or annual pay raises, more people may find themselves pushed into higher tax brackets—a phenomenon known as “fiscal drag.”
For many taxpayers, this could result in a larger portion of their income being taxed at a higher rate, effectively increasing their overall tax bill even if their real income hasn’t increased significantly. Middle-income earners and those receiving salary increments may feel the impact more acutely. While this measure helps the government raise additional revenue without increasing headline tax rates, it can reduce disposable income for households, affecting budgeting and spending power. It’s essential for individuals to be aware of their tax bracket and consider the implications for their personal finances, possibly seeking financial advice to navigate these changes.
Business taxes and employment costs are also affected. Employers will face a 1.2 percentage point increase in National Insurance contributions, raising the rate to 15% from April 2025. The threshold at which employers start paying will decrease to £5,000. While employees’ take-home pay remains unaffected, higher employment costs may lead employers to reconsider hiring plans or wage increases. This could potentially impact job creation and wage growth, particularly in sectors with tight margins.
Supporting small businesses, the Employment Allowance is raised to £10,500, and eligibility is expanded by removing the £100,000 eligibility threshold. This means many small employers will pay no National Insurance contributions, easing their financial burden. Taken together, 865,000 businesses will pay no NICs at all, and more than half of employers with NICs liabilities will either see no change or will gain overall next year. This measure helps maintain employment levels and encourages entrepreneurship.
However, larger businesses that do not qualify for the Employment Allowance may face increased costs due to higher National Insurance contributions, which could affect their investment decisions, wage policies, or expansion plans.
Environmental Initiatives and Lifestyle Impacts
Environmental initiatives and lifestyle impacts are prominent in the Budget. The government is extending incentives for electric vehicles, making them more affordable for consumers and businesses. By lowering the cost of owning an electric vehicle through extended allowances and tax incentives, the government encourages a shift towards cleaner transport, contributing to environmental sustainability and reducing pollution-related healthcare costs.
However, these measures may also place an additional financial burden on those who cannot yet afford electric vehicles, particularly in areas where EV infrastructure is still developing. Consumers reliant on traditional vehicles may face higher costs without immediate alternatives, which could strain household budgets.
Adjustments to Air Passenger Duty (APD) will increase rates from 2026-27, particularly for private jets, which will see a 50% rate hike. Economy-class passengers will pay an additional £2, slightly increasing travel costs. This measure seeks to reduce carbon emissions by making air travel more expensive, especially for less efficient modes of air transport, promoting greener alternatives.
While this measure aims to encourage environmentally friendly travel choices, it may also make holidays and air travel more expensive for the average consumer. Families planning trips abroad may face higher costs, which could limit travel options or increase financial pressure.
The Soft Drinks Industry Levy is being uprated, which may lead to price increases for sugary drinks. This could encourage consumers to opt for healthier options, aiming to reduce sugar consumption and combat public health issues like obesity.
Although the aim is to reduce sugar consumption, the increased prices may disproportionately affect lower-income households who spend a larger proportion of their income on food and beverages. Consumers may experience higher grocery bills, which could strain tight budgets.
The Autumn Budget 2024 introduces a comprehensive set of measures that will have varied impacts on individuals across the UK. From increased wages and support for vulnerable households to changes in taxation and significant investments in public services, the Budget seeks to balance immediate needs with long-term economic goals.
However, it’s important to recognise that some policies may have unintended consequences or pose challenges for certain groups. While measures like wage increases and environmental incentives have clear benefits, they may also result in higher costs for businesses and consumers, potentially impacting employment opportunities and household finances.
Understanding these changes is crucial for navigating the financial landscape ahead. Whether you’re an employee, a business owner, a student, or a retiree, these policies will, in some way, touch your everyday life. Staying informed empowers you to make decisions that align with your personal and professional objectives.
As we move forward, it’s essential to engage with these economic policies, consider their implications, and participate in the broader conversation about the direction of our economy and society.