UK Autumn Budget 2024 – Fundhouse Comment

Home » UK Autumn Budget 2024 – Fundhouse Comment Published: 30th October 2024 This Article was Written by: Ben Jones - Fundhouse   Budget 2024 , Capital Gains Tax , Inheritance Tax

In the buildup to Labour’s first UK Budget for 14 years, it was widely expected that Chancellor Rachel Reeves would announce a tax-and-spend approach with the dual purpose of fixing the UK’s damaged public finances and stimulating economic growth.

The expectation for how this would be funded had been characterised as progressive – with Labour stating that those with the broadest shoulders should bear the heaviest burden, leaving ‘working people’ protected. Accordingly, there were few surprises today, as the Chancellor set out Labour’s stall by criticising the state of the economy they had inherited, claiming that “public services were on their knees” and highlighting a £22bn public finance blackhole first exposed in July. This paved the way for Reeves to declare they would “turn the page on the last 14 years” and invest in order to grow. Achieved by the “unavoidable” increase in taxes to the tune of £40bn, she reiterated the scale and seriousness of the job at hand, before stating that the decisions she had taken were responsible, inevitable and necessary.

Policy highlights

Implications for individuals

• Employment. No changes to income tax/National Insurance for employees, as promised.
• Capital gains tax (CGT). Basic rates up from 10% to 18%, higher rates from 20% to 24%. Business Asset Disposal/Investors Relief rising from 10% to 18% by 2026 (but limits kept). No change on residential property.
• Inheritance tax (IHT). Thresholds frozen out to 2030. Pension pots now subject to IHT.
• Property. More affordable homes. Stamp Duty Land Tax up from 3% to 5% on 2nd homes/investment properties.
• Other. No VAT rises. Non-dom tax system to be replaced with residence-based regime. Reform to ‘carried interest’ regime – to be treated as income by 2026.

Implications for businesses/national economy

• Public services. Significant day-to-day budget increases (c.4% real) for NHS spending/capital projects. Measures to drive efficiencies across public services. Significant new spend on teachers, the running/building of schools. More funds to crack down on petty crime, gangs, new prison spending. Defence spending ahead of NATO targets, with specific commitment to Ukraine support. Increased budget to local and devolved governments.
• Businesses. Employer National Insurance Contributions rise to 15% (better reliefs for small businesses), raising c.£25bn. Private schools to charge VAT and pay business rates. Lower rates for high-street/hospitality/leisure. No Corporation Tax rises, maintain reliefs/allowances. Cuts to agricultural/ property reliefs.
• Industries. Tougher tax environment for oil and gas companies. Increase in the soft drinks levy. A mix of outcomes for different alcohol duties. Air passenger duties increased. Increase to tobacco duty, and a new (lower) vaping duty. A new National Wealth fund to boost investment in growth industries and infrastructure.

Outlook

As alluded to earlier, there was little of surprise in the announcements in today’s Budget, and few significant policies that hadn’t been leaked previously. If anything, the overall message was less expansionary than had been expected. Among the most affected will be those that have intergenerational or international tax planning requirements, as well as investors and entrepreneurs, but the impact hasn’t been as far-reaching as was perhaps first feared. This was seen in the muted market response, where both in the buildup to, and during, the Chancellor’s delivery, the pound wobbled slightly, while gilt yields briefly fell, before climbing during Rishi Sunak’s opposition response. With regards to UK equities, both large and smaller business share prices remained fairly flat. At present, we do not plan on making any changes to portfolios in response; we remain focused on long-term valuations, and try to ignore short-term political news.

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