In a historic move, Chancellor Rachel Reeves has unveiled Labour's first budget in 14 years, marking it as the biggest tax-raising fiscal event since 1993. The Autumn Budget 2024 has increased taxes by £40BN, and comes at a steep cost to taxpayers.
Key Tax Increases
Employers' National Insurance Contributions: One of the most significant changes is the increase in employers' National Insurance contributions. The rate will rise from 13.8% to 15% starting April 2025, with the threshold for payments lowered from £9,100 to £5,000. This move is expected to generate an additional £25 billion. Employers will pass this on to workers via lower wages, cutting jobs and increases in prices.
Capital Gains Tax: The lower rate for capital gains tax will increase from 10% to 18%, and the higher rate will go from 20% to 24%. This change is aimed at raising substantial revenue from those who profit from the sale of assets.
VAT on Private School Fees: Starting January 2025, VAT will be introduced on private school fees. This measure is expected to generate significant revenue but has sparked controversy among private education advocates.
Inheritance Tax: The inheritance tax thresholds will be frozen for an additional two years until 2030. This freeze means more estates will be liable for the tax as property values rise. Pensioin pots will be included in assets liable for IHT as from 2027.
Tobacco and Vaping Duties: The budget also includes a renewal of the tobacco duty escalator at RPI +2% and a 10% increase in duty on hand-rolled tobacco. Additionally, a flat-rate duty on all vaping liquid will be introduced in 2026.
Air Passenger Duty: The rate of air passenger duty for private jets will increase by 50%. This measure targets the wealthier segment of society, aiming to raise additional funds while promoting environmental responsibility.
Impact on the Public
The budget's tax increases are expected to have a broad impact on the British public. Employers will face higher costs due to the increased National Insurance contributions, which will be passed on to employees in the form of lower wages or reduced hiring. The changes to capital gains tax and inheritance tax will affect those with significant assets, potentially leading to higher tax bills for many families.
The introduction of VAT on private school fees will likely increase the cost of private education, making it less accessible for some families. The increases in tobacco and vaping duties will hit smokers and vapers, while the higher air passenger duty will affect those who frequently travel by private jet.
Conclusion
The significant tax increases will undoubtedly place a heavier burden on taxpayers. As the public and businesses adjust to these changes, the true impact of the budget will become clearer in the coming months. Additonally, the OBR do not see any material imporvement on GDP over the next 5 years and the Bank of Engkland may well hold off further interest rate cuts, as yields are increasing.
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