Autumn Budget 2024: National Minimum Wage increases, Significant IHT changes and increase in national insurance payments for employers

Rachel Reeves, the UK’s first female chancellor, today delivered the Autumn Budget 2024, the first Labour budget since 2010.  Of the choices she has made, she said, “They will restore stability, protect working people, fix the NHS and rebuild Britain”.

Wages, benefits and pensions

From April 2025, the National Minimum Wage paid by employers across the UK will rise as follows:

• For employees aged 21 and over, the National Minimum Wage will rise from £11.44 an hour, to £12.21.
• For employees aged 18, 19 or 20, the National Minimum Wage will rise from £8.60 an hour, to £10.
• For employees aged 16 or 17, the National Minimum Wage will rise from £6.40 an hour, to £7.55.

The separate apprentice rate which applies to eligible people under 19 – or those over 19 in the first year of an apprenticeship – will also increase from £6.40 an hour, to £7.55.

In April 2025, benefits will rise by 1.7%, in line with inflation.  The most common of these is universal credit.  For a single person under 25, this will rise to about £317 a month and for a couple aged over 25, it will rise to around £628 a month, depending on their circumstances.

The full, new flat-rate state pension (for those who reached state pension age after April 2016) will rise in April, in line with average earnings, going up by 4.1% to £11,975 a year.

The full, old basic state pension (for those who reached state pension age before April 2016) is expected to rise to £9,175 a year.

Personal taxes

The government will increase the Lower Earnings Limit and the Small Profits Threshold for National Insurance contributions (NICs) by 1.7% for 2025/26 to £6,500 and £6,845 per annum respectively. For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs rates by 1.7% for 2025/26. The main Class 2 rate will be £3.50 per week and the Class 3 rate will be £17.75 per week.

Inheritance tax – Reeves extended the allowance freeze to 2030 from 2028. That is, the £325k nil rate band and the potential £175k residential nil-rate band remains in place until 2030.

Pensions will now fall into a person’s estate as of April 2027. This is a huge change for pensions and may be complicated to implement. The devil will be in the detail.

Business Property Relief & Agricultural Property Relief – From April 2026 BPR/APR will only apply to the first £1m of assets, in addition to the usual allowances. Thereafter, 50% relief will apply giving an effective IHT rate of 20%. The AIM market which currently attracts BPR will also only receive 50% relief. These policies will significantly impact business owners, farmers, and landowners.

Capital gains tax

CGT rates – The basic rate increased from 10% to 18%, and the higher rate from 20% to 24%. CGT rates for property will stay the same at 18% and 24% for basic and higher rate taxpayers respectively. Effective immediately.

BADR (Business Asset Disposal Relief previously know as Entrepreneurs relief) – The allowance remains at £1m, but the rate of tax increases to 14% from 6^th April 2025, and 18% from 6^th April 2026. This is clearly bad news for small business owners, with a potential £80k tax hit from April 2026 onwards.

Business taxes

From April, employers will pay National Insurance contributions on workers’ earnings above a threshold of £5,000, currently £9,100. In addition the employers National Insurance rate increases from a rate of 13.8% to 15%.

Employment allowance – Currently allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. The amount of the Employment Allowance will be increased from £5,000 to £10,500 and the £100,000 threshold for eligibility will be removed.

Corporation tax – paid by businesses on taxable profits over £250,000, will be frozen at 25% until the next election.

HMRC interest rates – From 6 April 2025, the government will increase the late payment interest rate charged by HMRC on unpaid tax liabilities by 1.5%.

Other news for households

• In England, from January the £2 cap on single bus fares will rise to £3.
• Fuel duty has been frozen since 2011, and will continue, and the 5p cut to fuel duty on petrol and diesel, that was due to end in April 2025, will be extended for another year.
• Tax on tobacco will be increased by 2% above inflation, and by 10% above inflation for hand-rolling tobacco. A flat rate of duty will be applied on all vaping liquid from October 2026, at £2.20 per 10ml vaping liquid.
• Tax on non-draught alcoholic drinks is to increase by the higher Retail Price Index (RPI) measure of inflation, but tax on draught drinks is to be cut by 1.7%.
• £11.8bn has been allocated to compensate victims of the infected blood scandal, and £1.8bn has been set aside for wrongly prosecuted Post Office sub-postmasters.
• VAT at the standard rate of 20% is to be added to private school fees from January 2025.

Housing

The affordable homes budget, which runs until 2026, is to be boosted by £500 million.
The stamp duty surcharge, paid on second home purchases in England and Northern Ireland, is to increase from 3% to 5%.

If you would like to discuss how the Autumn Budget will affect your personal or business finances, please contact JW Hinks today.