On Wednesday 30 October 2024, Chancellor Rachel Reeves delivered the first Labour Budget in 14 years. In her opening remarks, Reeves pledges “more pounds in people’s pockets” and improved living standards. The only way to drive economic growth is to “invest, invest, invest”, she says. The government must “restore economic stability and turn the page on 14 years” of Conservative government, Reeves says. The Labour party has rebuilt the UK economy before, and will “rebuild Britain once again”.
Reeves says this budget will raise taxes by £40bn.
There’s a lot for people to digest, particularly for businesses, so we’ve put together the things SMEs should definitely get to grips with below:
- National Minimum Wage: The “national living wage”, the legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.There will be a single-adult rate phased in over time to eventually equalise pay for under-21s. National Minimum Wage will rise for people aged between 18 and 20-years old from £8.60 to £10.
- Employer’s National Insurance Contributions (NIC): Employers NIC will be increased to 15% from April 2025. The secondary threshold will be reduced to £5k.
- Employment Allowance: Employment allowance will be increased to £10.5k from April 2025.
- Capital Gains Tax (CGT): Capital gains tax will be increased. The lower rate will be raised from 10% to 18%, and the higher rate from 20% to 24%. There will, however, be no increase on the 18% and 24% capital gains rate imposed on the sale of second homes.
- Business Asset Disposal Relief (BADR): The rate of CGT that applies to Business Asset Disposal Relief will rise to 14% in April 2025, and then to 18% in April 2026.
- Business Rates: A 40% relief on business rates for retail leisure and hospitality businesses will be introduced. The small business rates multiplier will be frozen.
- Corporation Tax: The cap on corporation tax will be maintained at 25% for duration of parliament. The capital expenditure scheme will be maintained.
- UK Non-Domicile Regime: From April 2025, the UK non-domicile regime will be abolished. A new residency scheme will be introduced as a replacement.
- Carried Interest: Capital Gains Tax rates will increase on carried interest to 32% from April 2025 with further reform planned from April 2026.
- Stamp Duty Land Tax: Effective from 31 Oct 2024, there will be an increase in the Stamp duty land tax surcharge on second homes by 2% to 5%.
- Income Tax & NIC Thresholds: No extension on the freeze of Income tax and NIC thresholds beyond the decisions of the previous government – Reeves says the government will increase personal tax thresholds on income tax and national insurance in line with inflation from 2028-29, something that had been floated as a possibility. This avoids dragging people into higher tax bands.
- Inheritance Tax: Inheritance tax (IHT) threshold freeze will be extended until 2030. Inherited pensions will be brought into IHT from April 2027, with reforms on Agricultural Property Relief and Business Property Relief. From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%.