Posted on: 30th October 2024 in News
After weeks of speculation, all eyes were on the chancellor today as she delivered Labour’s first Budget in 14 years.
It has been five years since the first picture of a black hole was captured. Fast forward to 2024, and it is a different kind of black hole that has been making headlines.
But unlike those in space, this black hole is one that Labour aims to plug.
In an audit published by the Treasury at the end of July, it was forecast that the UK’s public finances were £21.9bn in the red.
In recent weeks, Chancellor Rachel Reeves has repeatedly pointed the finger at the Conservatives for the “£22bn black hole” they left behind. Today was no exception.
We have already seen the Labour Party take action. The first thing on the chopping block was winter fuel payments. But that was just the start, as Reeves looked to introduce tax rises and spending cuts to raise £40bn.
Even Prime Minister Sir Keir Starmer had warned people to brace themselves for a “painful” Budget — but was it as bad as expected?
Below, we cover some of the key talking points from today’s Budget and what it means for you and your finances.
The chancellor confirmed that the non-dom tax status will be abolished from April 2025. Ms Reeves called the non-dom tax regime an “outdated concept”.
Instead, a new residence-based scheme will replace the outgoing system. Ms Reeves said the new system will include “internationally competitive arrangements”.
Temporary Repatriation Relief is set to be extended to three years to encourage investment in the country. This move could see billions of pounds injected into the UK.
According to the Office for Budget Responsibility (OBR), the new measures will raise £12.7bn over the next five years.
Employers are set to pay more National Insurance (NI), a move that was widely expected ahead of the Budget. The chancellor says that new measures will raise £25bn a year.
NICs for employers will increase by 1.2% to 15% for every employee from April 2025. The threshold for businesses to start paying NIC will also fall from £9,100 to £5,000.
The primary corporation tax rate on profits over £250,000 will remain at 25% until the next election.
The income tax and National Insurance (NI) thresholds have been frozen since 2022. And while the chancellor was expected to extend the freeze beyond 2028, that was not the case.
From 2028-29, income tax and NI thresholds will once again be uprated in line with inflation.
A freeze on inheritance tax (IHT) will be extended for two years until 2030. This means the threshold for paying IHT will remain at £325,000 and £500,000 if the estate is passed to direct descendants.
It was also confirmed that inherited pensions will be brought into IHT from April 2027.
As expected, the chancellor confirmed that Capital Gains Tax (CGT) will increase.
The lower rate for CGT will increase from 10% to 18%. Meanwhile, the higher rate is set to rise from 20% to 24%. However, CGT on residential properties will remain at 18% and 24%.
From tomorrow (31/10/2024), the stamp duty surcharge for second homes will increase to 5% — an increase of 2%. This will impact those buying second homes as well as landlords.
News of a UK State Pension increase was already known ahead of the Budget.
The State Pension increases yearly by either a flat 2.5%, earnings growth or the rate of inflation — whichever is highest. This is an arrangement called the triple lock.
Today, it was confirmed that the State Pension will increase by 4.1% from April 2025 under the triple lock.
The chancellor had already made her plans clear that the only way to drive economic growth is to “invest, invest, invest”.
The chancellor has committed to funding in key sectors, which include:
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