Chancellor of Exchequer Rachel Reeves delivered a speech highlighting the key points in the new budget for the last fiscal quarter of 2024. The announcement marks the first major financial statement released by the new Labour government led by Sir Kier Starmer.

For further information not covered in this summary, the government have detailed the full budget in a 170-page document that can be found online.

Taxation

Labour announced a series of potentially daunting tax changes, aiming to raise around £36bn a year in accumulated revenue. This marks around 1% of the UK’s GDP (currently around $3.5 trillion).

The national insurance tax has been raised by around 1.2% to 15%. However, the baseline rate at which one has to pay the tax has been lowered from £9100 to £5000. This is nearly a 50% reduction. The Stamp Duty Land Tax (SDLT) rate has been raised from 3% to 5% for buyers of second homes.

This may increase prices for property investors, but will potentially benefit first-time buyers. Note that the threshold at which SDLT will apply is unchanged- £250,000 for standard purchases, and £425,000 for first-time buyers.

The lower bracket rate for Capital Gains Tax rose from 10% to 18%, and the higher bracket from 20%-24%. Separate CGT rules for the disposal of residential property have been removed. The standard rate of Inheritance Tax has remained unchanged at 40%. You do not need to pay inheritance tax for inheritance under £325,000.

Wages

The legal minimum wage has increased from £10.42 to £11.44 an hour, for individuals above 20. This could raise pay by £1400 annually. 18-20-year-olds will experience a more significant increase, from £8.60 to £10.00. This is to eventually make the minimum wage the same for everyone above 18.

This could raise pay by £2500 annually. The slower inflation decline in consumer-facing services sectors is primarily driven by wage growth and labour shortages, which may present structural inflationary risks to the UK economy.

These wage increases are part of the government’s efforts to support lower-paid workers and address cost of living concerns, while also aiming to stimulate economic growth.

Business Rates + Spending Rules

New Fiscal Rules: The government announced new fiscal rules to ensure economic stability. These rules will ensure the government only borrows for investment and that public sector debt falls over time.

Business Rates: There will be permanent reductions in tax on properties used for retail, leisure and hospitality from 2026. In the meantime, these businesses will receive a 40% reduction in their business rates bill, capped at £110,000.

The small business multiplier will be frozen for one year to protect over a million small properties from inflationary bill increases.

Labour aims to enforce strict taxation rules during the next few years to boost the UK economy. They want to turn the UK into a ‘hotspot’ for new investment and entrepreneurship, increasing the country’s economic dominance and influence, which some say has been dwindling recently.

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All Articles Belong to Copyright Holders: Cover Image from Institute for Government