The Labour Budget 2024 was expected to introduce some big increases in taxes as announced after the election with a black hole in public finances left by the Conservative government who had allegedly kept the Office for Budgetary responsibility in the dark about some of it’s plans.  After all of the rumours it was not as bad as it could have been, a case of over promise (the tax rises) and under deliver but there were a few headlines:

1. Increased rate and lower threshold for Employers NIC
2. Personal tax and NI not increased and promises of increased thresholds ahead
3. Capital gains tax rates increasing
4. Inheritance tax to be levied on inherited pension pots from 2027

The more detailed summary follows

Rhetoric

• The key to the budget was Invest, invest, invest
• Government will publish a line by line breakdown of the £22bn deficit left by the Conservatives
• The 2% inflation target to be retained
• Stability rule - to get the books to balance which will happen by 2027 rather than as expected in 2029

The savings

• Covid corruption commissioner to be appointed to reclaim money taken fraudulently
• Investing in HMRC to reduce the tax gap
• Improving productivity in the public sector to make sure peoples taxes go further

The expenditure

• Big increases in school funding
• And a big increase in funding for the NHS
• Funding will be made available for compensation of Post Office Horizon scandal and infected blood scandal
• Carers allowance – to allow earnings up to £10k pa without losing the allowance
• State pension increase by 4.1% next year ahead of the 1.7% for working rate benefits
• Cost of living support - National Living wage to increase to £12.21per hour and the gap with younger workers will be closed too as their rates increase
• Rail investment - Trans Pennine upgrade to go ahead, east west rail from Oxford to Cambridge to go ahead, HS2 commit to funding for tunnelling all the way to Euston
• Road budgets - more pothole funding, and the single bus fare cap will be raised from £2 to £3 and extended to December 2025

Corporate taxation

• Publishing a corporate tax roadmap
  • there will be a cap of 25% corporation tax for duration of this parliament
  • R&D relief retained
  • Annual investment allowance (AIA) retained and full expensing of asset purchases also retained
• Employers NI contributions will be increased to 15% from Apr 2025, and the limit at which it is paid will be reduced from £9k to £5k
• Protect the smallest companies so employment allowance increased from £5k to £10.5k, this will help alot of my clients!
• While the 75% discount on Retail, hospitality and leisure business rates will expire in April, the good news is it will be replaced by a 40% discount for 2025-2026
• Electric vehicle incentives to be maintained until 2028

Personal

• No increase in income tax or VAT
• The NI cuts by last government were not funded, but these will be retained so that working people will not lose out
• Income tax and NI thresholds (ie the personal tax allowances) - from 2028/29 these will be increased by inflation again slowing the rate at which people are drawn into higher rate tax
• Non doms - anyone who lives here should pay their taxes here, the non-dom tax regime will be abolished from April 2025, but an internationally competitive scheme will be introduced for temporary residents
• Capital gains tax, rates are to be increased from 10-18% for basic rate taxpayers and 20-24% for higher rate taxpayers for disposals from today 30 October 2024
• Entrepreneurs relief (BADR) limit to be retained at £1m but rates will increase from the current 10% rate to 14% from Apr 2025 then 18% from 2026
• Inheritance tax, only 6% will pay that this year so would have been an easy target but the £325k/£500k thresholds will be frozen until 2030, but inherited pension pots will be included in estates and therefore subject to IHT from 2027
• First £1m of agricultural and business relief tax free and 50% relief on estates above that at a rate of 20%
• Stamp duty (SDLT) increase on 2nd homes by 2% from 31 October 2024
• Increase in the interest rate on overdue tax by 1.5% in April 2025, it has already increased significantly in line with the base rate!

Duties

• Fuel duty, to reinstate the 5p/litre cut would be the wrong choice despite costing £3bn, so this will not increase
• Alcohol duty will increase by RPI from Feb 2025 but duty on draught products will be reduced by 1p off a pint to encourage people to use pubs
• Tobacco duty rising by 2% over inflation and duty on vaping fluids to be introduced from 2026
• Air passenger duty – will increase but by no more than £2pp for economy flights but £450pp for private jets – this was the most liked comment in my Twitter feed
• VAT on private school fees will apply from January 2025

The Labour Budget 2024 did not bring about some of the scare taxes but there are some which will impact clients! Further details will be released over the next few weeks and you should seek professional advice before taking any steps based on these contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Shrewsbury, Shropshire – Accountants who “speak your language”