The first Labour Party Budget in 14 years has been released, and our teams have been watching closely to help you make sense of the impact it may have.
Ahead of the budget, the Labour Party signalled new policies for raising funds to close a £22bn ‘black hole’. However, there has been widespread public discussion and debate about the veracity of the Labour Party’s new fiscal policies.
The Chancellor, Rachel Reeves, set the scene as to how her Party will raise the required £40bn to both stabilise and bolster the UK’s future relevance.
On balance, many of the speculative tax changes didn’t materialise; however, there will be elements of the Budget that affect everyone – from retirees to business owners and entrepreneurs and those looking at the property ladder.
At Baggette + Co Wealth Management, we understand that there are a lot of details and potential uncertainties which can be concerning. Beyond the headlines, we’ll see a deluge of analysis and opinions on how this will impact everyone.
Our teams have begun digesting the impact that this will have, and we’ll continue to do so over the coming days.
In the meantime, whilst the below is not an exhaustive list, we explore the high-level points that were covered off in the Autumn Budget and what this might mean for you and your money.
Budget Impact for Individuals
Capital Gains Tax
Capital Gains Tax (CGT) is applied to profits made when valuable assets, such as property or shares, are sold for more than their original purchase price. This tax generally affects items like investments or second properties and only applies to gains exceeding the set allowance of £3,000 per annum.
BUDGET IMPACT: It was announced that CGT rates will be rising from April 2025. The standard rate, payable by basic rate taxpayers, is moving from 10% to 18%. For higher rates and additional taxpayers, this will increase from 20% to 24%.
The rates for residential property sales remain unchanged and are already chargeable at the higher rates.
In relation to Business Asset Disposal Relief (‘BADR’) and Investors’ Relief, the £1 million threshold at the 10% tax rate will increase to 14% from April 2025 and 18% from April 2026.
State Pension
The State Pension is a regular payment from the UK government for people who reach the State Pension age and have paid enough National Insurance. It provides a basic income in retirement, though in many cases, it’s supported by personal or workplace pensions to provide additional financial security.
BUDGET IMPACT: The government has confirmed that it will maintain the State Pension Triple Lock for the duration of this Parliament. The basic and new State Pension will increase by 4.1% in 2025-26, which is in line with earnings growth.
Pension Tax Relief Reforms
Pension tax relief reduces the tax on private pension contributions, encouraging individuals to save more for retirement. The relief amount is linked to one’s income tax rate, allowing more of each contribution to go toward building a retirement fund.
BUDGET IMPACT: None. There was no mention of these reliefs in the Budget. We consider this to be positive, as it continues to encourage people to save for retirement.
Inheritance Tax (IHT)
Inheritance Tax is charged on the estate of someone who has died, including assets like property, money, and possessions. If the estate’s value exceeds a certain threshold, the portion above this amount is taxed, with specific exemptions available for particular assets.
BUDGET IMPACT: The Inheritance Tax Threshold will stay frozen until 2030, and from April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all. However, for assets over £1m, inheritance tax will apply with 50% relief at an effective rate of 20% on these assets only.
From April 2027, pensions will be subject to inheritance tax, aiming to align pensions with other inherited assets.
Private School Fees
Private school fees are the costs parents pay for their children to attend independent schools in the UK. These fees cover tuition and often additional expenses for extracurricular activities, uniforms, and supplies. Importantly, there had previously been no VAT payable on private school fees. Some families use savings, investment plans, or specific education funds to help manage these costs.
BUDGET IMPACT: The Government will introduce 20% VAT on education and boarding services provided for a charge by private schools from January 2025. The government will also remove business rates charitable rate relief from private schools in England from April 2025. The expectation is that these fees will be passed on to parents and grandparents.
Fuel Duty Increase
Fuel Duty is a tax on petrol, diesel, and other fuels used in vehicles and heating systems. It’s a major revenue source, and adjustments in this duty can influence fuel prices, which affects both consumers and the broader economy.
BUDGET IMPACT: Mrs Reeves confirmed that there will be a freeze on this and no increase. This will maintain the temporary 5p cut for another year, which will surely be welcomed by some motorists.
Income Tax
Income Tax is a tax on the money people earn from work or other sources like investments. Individuals pay Income Tax on their earnings above a certain threshold. The government considers adjusting Income Tax rates or thresholds to increase revenue, which can affect how much income people keep after taxes.
BUDGET IMPACT: None. As per Labour’s manifesto pledge, these taxes have not increased for individuals.
Stamp Duty Land Tax
Stamp Duty is a tax paid on property and land purchases in the UK, typically by the buyer. The amount depends on the property’s purchase price and sometimes its location. This tax can significantly affect the costs of buying a home, particularly in high-value areas.
BUDGET IMPACT: This remains frozen for single property owners. However, there is an increase in the second home tax, which is increasing from 31st October 2024 (the only tax increase effective immediately):
| Property Price (£) | Basic | Higher (Additional Property) before 31/10/2024 | Higher (Additional Property) from 31/10/2024 |
| Up to 250,000 | 0% | 3% | 5% |
| 250,001 – 925,000 | 5% | 8% | 10% |
| 925,001 – 1,500,000 | 10% | 13% | 15% |
| over 1,500,000 | 12% | 15% | 17% |
Non-Domiciliated Taxation
Non-domiciled taxation applies to individuals who live in the UK but consider their permanent home (‘domicile’) to be abroad. These non-domiciled (non-dom) individuals can choose to be taxed on the remittance basis, meaning they pay UK tax on UK income and gains, but only on foreign income and gains if they bring that money into the UK.
BUDGET IMPACT: The Labour government is removing the concept of domicile status from the tax system and replacing it with a new internationally competitive residence-based regime from April 2025. This includes ending the use of offshore trusts to shelter assets from Inheritance Tax and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime.
Budget Impact for Business Owners
Employee National Insurance
National Insurance Contributions (NICs) fund public benefits such as healthcare and pensions, and both employees.
BUDGET IMPACT: None. This will also remain frozen at current levels:
| Earnings per week (£) | Employee Contribution |
| Up to £242 | 0% |
| £242.01 – £967 | 12% |
| Above £967 | 2% on excess |
Explanation:
- Up to £242 per week: No National Insurance contributions.
- £242.01 – £967 per week: Employees pay 12% on earnings.
- Above £967 per week: Employees pay 2% for earnings.
Employer National Insurance
Employer National Insurance is a tax that employers in the UK pay on their employees’ earnings above a certain threshold. It helps fund public services like healthcare and pensions. Employers contribute a fixed percentage of each employee’s salary once it exceeds the threshold.
As of the 2023-2024 tax year, employers in the UK start paying Employer National Insurance Contributions on their employees’ earnings above the Secondary Threshold, which is £175 per week or £9,100 per year.
BUDGET IMPACT: Employer NI will now be payable from £5,000pa, reduced from £9,100. The rate is also increasing by 1.2% from 13.8% to 15.0% starting April 2025. This will mean employers will pay more in National Insurance. If you are a business owner, it is important that you speak with your accountant about any concerns.
Employment Allowance
Employment Allowance allows eligible employers to reduce their Employer National Insurance bill by up to £5,000 per year. The current Employment Allowance gives employers with National Insurance Contribution (NICs) bills of £100,000 or less a discount of £5,000 on their employer NICs bill.
BUDGET IMPACT: The Labour government plans to protect the smallest businesses by increasing the Employment Allowance to £10,500 next year. The government will also expand the Employment Allowance by removing the £100,000 eligibility threshold, to simplify and reform employer NICs so that all eligible employers now benefit.
This should result in many smaller businesses paying less employer National Insurance Contributions.
Business Rates
Business rates are taxes that businesses pay on their properties, like shops or offices. These rates fund local services, but there’s an effort underway to make the system fairer for smaller businesses and high-street shops, ensuring they are not disproportionately burdened.
BUDGET IMPACT: The current 75% discount to business rates which was due to expire in April 2025, will be replaced by a discount of 40%, up to a maximum discount of £110k.
Value Added Tax (VAT)
Value Added Tax is a tax applied to most goods and services sold in the UK. Consumers pay VAT when they buy these items, as it’s included in the purchase price. The government sometimes considers adjusting the VAT rate to increase revenue, which can affect prices and consumer spending.
BUDGET IMPACT: None.
Corporation Tax
Corporation Tax is a tax on the profits made by companies and certain other organisations in the UK. Businesses pay Corporation Tax on their taxable profits, which include income from trading and gains from selling assets. The government sometimes considers adjusting the Corporation Tax rate to increase revenue or stimulate economic activity, which can affect company finances and decisions about investment and growth.
The Corporation Tax payable main rate for non-ring-fenced profits is 25% for profits above £250,000. A small profits rate of 19% was also announced for companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.
BUDGET IMPACT: None. The Labour Party have committed to freezing Corporation Tax levels for the duration of this Parliament.
Talk To Our Independent Financial Advisers in Dorset
Our experienced Independent Financial Advisers (IFAs) in Dorset and Hampshire are here to shed light on the Budget changes and help you navigate their potential impact on your financial well-being.
If you have any concerns following the Budget and how this may impact your financial situation, we strongly recommend contacting an experienced and independent financial adviser.
Our independent financial advisers are ready to assist you with expert financial planning advice and strategies tailored to your specific needs.
Contact Oscar Hjalmas, our CEO and Independent Financial Adviser, on 01202 676983 or email [email protected] to arrange a consultation.
More updates by Oscar Hjälmås
Baggette + Co Wealth Management is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate estate planning or tax advice. The above information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change, and the value of tax reliefs depends on your individual circumstances.
SOURCES: Autumn Budget 2024: Fixing The Foundations To Deliver Change