What to expect from Budget Day 2024

30^th October is the all-important date marked in everyone’s calendars this autumn. Why? The Labour government will conduct its first Budget Day and lay out plans for the upcoming year with regards to changes in tax and public services.  

With key initiatives likely to be introduced that will have a great effect on the country’s financial status, speculation is on the rise as to how exactly the public will be impacted by new legislation.  

We’ve gathered some details on what you might expect from the upcoming autumn budget below. 

What has already been announced/rumoured? 

Here are some key areas that have been targeted for reform over the coming months: 

Winter fuel payments 

Criteria around receiving winter fuel payments has been reviewed and tightened, meaning millions of pensioners may no longer be able to claim from this winter. To be eligible, you must now be over the State Pension age and be receiving one of the following benefits: income support, income-based jobseeker’s allowance, pension credit, universal credit, income-related employment, support allowance. There is, however, mention of this change being softened with the encouragement of eligible people applying for pension credits.  

VAT on private schools  

2025 will likely see the introduction of 20% VAT on private school fees. The hope is this money will be redirected to help fund teachers’ salaries at state schools. The significant increase to termly tuition fees could see middle income parents forced to transfer kids from private to state schools. 

State pension on the rise  

We could be looking at an increase of over £460 per year thanks to the ‘triple lock’ policy which the Labour government promises to keep in place. The policy looks at raising the State Pension annually to be in line with average earnings and increases in prices.  

Incoming tax hikes 

While Labour has been adamant they will follow strict fiscal rules in order to maintain economic stability, Prime Minister Keir Starmer also warned that the budget includes changes that are ‘painful’. The £22 billion public finance deficit left by the previous government will likely lead to tax hikes. Chancellor Rachel Reeves has already promised there will be no increases on income tax, Employee NI (EE NI) and VAT, but other taxes, such as Employer’s NI (ERS NI), are still on the table to be targeted. 

What’s likely to be addressed?  

Tax increases  

Seeing as income tax, EE NI and VAT are off the table, speculation is turning towards Capital Gains Tax (CGT) and Inheritance Tax (IHT) as likely targets. When it comes to the latter, there’s a chance Labour plan to cap the amount of inheritance tax relief available. As it stands, some businesses and agricultural assets can claim 100% tax inheritance if they meet certain criteria. This change may impact individuals too, resulting in lower values of inheritance being taxable.  

When it comes to CGT, it’s a strong possibility that the government will look at increasing the rates to be in-line with income tax. This means that, for the highest earners, gains could be taxed up to 45%. This would have a knock-on effect on Business Asset Disposal Relief, a relief that helps you to sell your company or shares once certain criteria is met. Currently, capital gains tax relief reduces the rate from 20% to 10% on business assets/disposals of business.  

Dividend tax is another one to watch out for. Currently taxed below the rate of income tax, an increase in this area would affect limited company owners paying themselves through dividends. The resulting effect? A decrease in take-home pay. 

Pension tax relief cuts 

With a 2-stage pension review already having been launched, all signs point towards pension tax relief being further discussed come the 30^th.  As it stands, those who contribute to pension pots can get tax relief on any money put in; you are entitled to withdraw up to 25% of your pot tax-free (up to £268, 275) at 55. This tax-free lump sum is set to remain, however, it may be reduced.  

What’s more, if a flat tax relief is implemented on pension contributions, higher earners and taxpayers could face considerably less tax relief.  

Fuel duty 

There’s a chance the fuel tax rate will be increased once again so drivers may be facing additional costs when it comes to fuel. 

Council tax reforms  

While it’s been confirmed that council tax rates aren’t set to rise, we could potentially see cuts made to council tax discounts and changes to who is eligible for them. 

Day 1 Unfair Dismissal Rights Improved  

The current qualifying period for claiming unfair dismissal has been set to 2 years for some time. In a positive improvement deemed by the government to be the ‘biggest upgrade to workers’ rights in a generation’, the new Employment Rights Bill sees a ban on exploitative zero-hour contracts as well as ending fire and rehire. The introduction of these employment rights means greater protection against unfair dismissal from the very start of employment on day one. We are hopeful that this will lead to further positive change for workers’ rights, such as aiding business expansion and providing clear roadmaps on business tax.  

How will contractors and small businesses be affected? 

While it’s still early in the day to say, the general hope is that this Budget Day will come with some clarity, stability and supportive legislation that will benefit the contracting sector, which can sometimes be overlooked.  

It’s no secret that Labour’s mission statement has revolved around growing the economy. To do so successfully, there needs to be enough emphasis placed on aiding businesses with this expansion, as well as creating strong foundations on which to build stable economic growth. The hope for the upcoming budget is that a clear tax roadmap will be laid out which details business tax incentives clearly to promote clarity and certainty for company owners going forward. 

Changes in recent years, such as the introduction of IR35, have caused many frustrations and a great deal of instability within this sector. The main thing we hope will be addressed and introduced are tax initiatives that will enable professionals in this sector to train, upskill and flourish in the way we know they can and deserve.  

What’s next?  

If you want to keep up to date with everything Budget Day, make sure you follow us on socials and check in online to read our weekly blogs in the run-up to October 30^th. We’ll be covering a range of topics to help prepare you for potential incoming changes, as well as recapping last year’s key budget announcements and how small businesses and contractors were affected.