Article Understanding the 2024 Autumn Budget – what it means for you

On 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget and the key changes the government will be making to the economy for the foreseeable future.

After Reeves previously claimed there was a ‘£22 billion black hole’ in public spending, she announced a variety of significant changes that could impact you and your finances.¹

Unless otherwise stated, all statements made in our article have been taken from the Autumn Budget announcement on 30 October 2024 and are accurate at the time of writing.

What is the Autumn Budget 2024?

The Autumn Budget, previously referred to as the Autumn Statement, is an annual statement made by the Chancellor of the Exchequer to update the House of Commons on the state of the economy and how they plan to tackle certain areas.

The Budget will set out how the government plans to make decisions based on tax and spending for the foreseeable future.

Since assuming power in July 2024, the Autumn Budget was Labour’s first statement in 14 years.

Here’s what it could mean for you.

Key announcements from the Autumn Budget

1. National Living Wage increase
2. No further extensions to the freezing of income tax and National Insurance thresholds
3. State Pension increase
4. Increase to employer National Insurance contributions
5. Pension Credit
6. What else was announced?
7. What hasn't changed?

1. National Living Wage increase

Those aged 21 and over will see a 6.7% increase in the National Living Wage, rising from £11.44 to £12.21 per hour.

With the cost of living rising, this increase will provide much-needed financial relief to those 21 and over on the lowest incomes, and ease the ongoing burden of rising living costs.  

This rise will also provide a hidden benefit to pension contributions, allowing people to potentially build a larger pot for the future. Any employees on the National Living Wage who are auto-enrolled into a workplace pension will benefit from a total annual pension contribution of £1,278 a year.² This contribution will comprise their own and their employer’s pension contributions, adding an additional £112 into their pension annually.

Those aged 18 to 20 will see a 16.3% increase of the minimum wage from £8.60 to £10 an hour. While workers aged 16 to 17 years old, as well as those receiving the apprentice rate, will see an 18% uplift from £6.40 to £7.55 an hour.

2. No further extensions to the freezing of income tax and National Insurance thresholds

During the July General Election, Keir Starmer’s Labour Party pledged they would not increase income tax rates, National Insurance and VAT, a statement they have now stuck by.³

In fact, they’ve gone one step further, with Reeves announcing there will be no extension of the current freeze on income tax and National Insurance thresholds. The freeze – introduced by the previous Conservative government in 2022, and in place until April 2028 – is often referred to as a ‘stealth tax’, as increasing earnings meant a number of people were pushed into higher tax brackets. However, the Chancellor confirmed this will no longer be the case, with thresholds to be updated in line with inflation from April 2028.

3. State Pension increase

The Chancellor announced the government will maintain the State Pension Triple Lock, with a 4.1% increase to the basic and new State Pension from April 2025. The full new State Pension will see an increase from £221.20 to £230.30 per week, or £11,975.60 a year. At the same time, the full basic State Pension will jump from £169.50 to £176.45 per week, or £9,175.40 a year.

4. Increase to employer National Insurance contributions

While the Chancellor said that she will not increase National Insurance, VAT, and income tax for ‘working people’ – she did announce that there would be an increase to the National Insurance contributions that employers pay, from 13.8% to 15%. The threshold in which they will start paying NI on employee’s earnings has also reduced from £9,100 to £5,000 too. This will start from 6 April 2025 to 6 April 2028 – it will then rise by inflation from there on. However, the amount employers can claim back from their National Insurance Bill will increase from £5,000 to £10,500.

5. Pension Credit

In an attempt to maximise take up of the Pension Credit and make sure those eligible are benefiting from it, the Chancellor announced a 4.1% increase to the Pension Credit Standard Minimum Guarantee from April 2025. ⁴ Designed to help people over State Pension age and those on lower incomes, this equates to an annual rise of £465 in the single pensioner guarantee and £710 in the couple guarantee.

What else was announced?

1. Capital Gains Tax (CGT)

Reeves announced the lower rate of CGT will rise from 10% to 18%, while the higher CGT rate will increase to 24% from 20%.

CGT is charged on any profits made from assets sold. These often include second homes or investments, including shares.⁵

This increase could mean that individuals who make profits on investments or through other Capital Gains could face higher tax bills when selling such assets.

The Capital Gains Tax threshold has significantly reduced in the last few years, from CGT only being charged on gains valued over £12,300 to now standing at £3,000. As of now, there are no further changes to this threshold.⁶

2. Inheritance Tax (IHT)

The Chancellor confirmed that the IHT threshold will be frozen for an additional two years until 2030.

IHT is due on any estate valued over the £325,000 IHT threshold. This includes anything from property to money and possessions.⁷

At present the first £325,000 of an estate can be inherited tax-free. If the estate includes a residence which is left to a direct descendant, this rate increases to £500,000. Where passed to a living spouse, or civil partner, it further increases to £1,000,000.⁸

Anything above the threshold will be taxed at the standard IHT rate of 40%.  This can be reduced depending on various factors, including where 10% or more of the net value of the estate is left to a charity.⁷

In addition, while most pension plans currently fall outside of an individual’s estate for IHT purposes, this will change from 6 April 2027, when most pension plans will start to count towards the IHT threshold.

There will be more on this to come.

3. Carers' Allowance

For those who care for someone for more than 35 hours a week, the Budget announced an increase of £45 per week. This increase is equivalent to 16 hours at the National Living Wage per week.

What hasn't changed?

No reduction to the tax-free lump sum

Despite speculation that there would be new limits for the tax-free lump sum, no changes were made.

Individuals are typically able to access 25% of their pension at 55 as a tax-free lump sum, capped at £268,275. This is positive news for those nearing retirement age, in particular for those who have built up substantial pots.

ISA allowance to remain the same

There will be no changes to the annual ISA allowance until 5 April 2030. It will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds.

The government also isn’t going ahead with the British ISA after mixed responses to the consultation earlier in the year.

So, what happens next?

The announcements made at the Autumn Budget could have an impact on you and other aspects of your personal life, including your savings, pension and employment benefits.

Particular changes, like the National Living Wage increase, will have more of an immediate impact as it comes into effect from April 2025. On the other hand, the income tax threshold freeze isn’t expected to be lifted until April 2028.

To get all the latest developments and details, you can read the Government’s full Autumn Budget report. You can also keep an eye on out on our Money tips hub for more information too.

This information is based on our understanding of current taxation law and HMRC practice, which may change.