Analysis: What the 2024 Budget Means for You

The Autumn Budget 2024 introduces sweeping changes that will affect households, workers, and savers across the UK. While some measures aim to support low-income workers and address rising living costs, others bring challenges for businesses, investors, and higher earners. Let’s explore the key takeaways.

Rising Employer NICs and the Job Market

From April 2025, employers’ National Insurance Contributions (NICs) will rise to 15%, with the threshold dropping to £5,000. While larger businesses may be able to absorb this, small and medium-sized enterprises (SMEs) may feel the pinch. This could impact job creation, employee benefits, and even wages, especially in sectors with tighter margins. Workers should be aware that this change might indirectly influence pay increases or hiring trends in the coming years.

Capital Gains Tax Changes: Impact on Investors

Effective immediately, the increase in Capital Gains Tax (CGT) means basic rate taxpayers will now pay 18% (up from 10%) on profits from shares, second properties, and other investments. For higher rate taxpayers, the rate rises to 24% (from 20%). These changes are significant for individuals selling long-term assets to fund retirement, pay for education, or cover major life expenses. Savers should review their tax strategies, as these adjustments may reduce the attractiveness of investing outside tax-efficient vehicles like ISAs (Individual Savings Accounts).

ISAs and Pensions: Still Powerful Tools for Savers

The good news for savers is that the tax-free benefits of ISAs and pensions remain unchanged, making them as valuable as ever for those looking to shield their savings from tax. The ISA annual allowance is £20,000, and pensions continue to offer generous tax relief on contributions within current limits. With CGT and other tax increases, these tools have become even more crucial for effective long-term financial planning.

Inheritance Tax Adjustments

While the inheritance tax (IHT) threshold is frozen until 2030, changes to agricultural property relief from April 2026 could affect families with farms or estates. Farms will only benefit from full relief on the first £1 million, with the remainder taxed at half the usual rate. Families with such assets should consider seeking advice to plan for these changes and avoid unexpected tax bills.

Tax Threshold Freeze Ending in 2028/29

The long-standing freeze on income tax thresholds, which has steadily drawn more taxpayers into higher bands, is set to end in the 2028/29 tax year. Until then, thresholds for the personal allowance (£12,570) and the higher rate (£50,270) remain fixed. As inflation pushes wages higher, more individuals will find themselves paying higher taxes. For more on how these measures compare within the UK, learn how income tax works in Scotland. While the freeze’s conclusion is a positive step for household finances, its long-term effects will depend on future adjustments to thresholds.

State Pension and Benefit Increases

The state pension will increase by 4.1%, a modest boost that will offer some relief to retirees. Pension credit recipients will see a slightly higher increase of 4.5%. For carers, the increase in the Carer’s Allowance earnings threshold to £10,000 is a welcome change, offering greater flexibility for balancing work and caregiving.

Wage Boosts for Low-Income Workers

The rise in the National Minimum Wage to £12.21 per hour delivers a meaningful uplift for workers in industries like retail and hospitality. For more insights on handling pay changes, read I've Secured a Pay Rise: What Should I Do?. This change, combined with a falling inflation rate, should improve living standards for those on the lowest incomes.

Everyday Costs and Sustainable Choices

Adjustments to Vehicle Excise Duty will incentivize the adoption of electric vehicles (EVs), reducing the cost of ownership for many drivers. Combined with ongoing government investment in green initiatives, this move aligns with broader efforts to lower household transport costs while promoting sustainability.

What It All Means for Savers, Workers, and Businesses

For most UK households, the 2024 Budget brings a mix of challenges and opportunities:

• Savers: The stability of ISAs and pensions as tax-efficient saving tools is a bright spot. In an environment of rising taxes elsewhere, making full use of these allowances is more important than ever.
• Workers: While the Minimum Wage rise benefits low earners, higher taxes, especially the frozen thresholds, could reduce take-home pay for middle-income workers over time. Use salary calculators to understand your revised net income.
• Businesses: Small employers will feel the impact of higher NICs, though the increased Employment Allowance provides some relief.

For more detailed breakdowns and analysis, explore further insights on the UK Autumn Budget 2024 and its potential implications on the economy.