2024 Autumn Budget: The winners and losers

After months of speculation, we finally have the details of the first Labour budget in 14 years. As with any Budget, there are some groups of people who are likely to gain from the announcement, with others set to receive a hit to their hip pockets.

Here, we’re looking at the biggest winners and biggest losers from Chancellor Rachel Reeves Autumn Budget.

Budget winners

The 2024 Autumn Budget lays out £40 billion worth of spending cuts and tax increases, making it the biggest tax-raising fiscal event since 1993.¹ However, all that money needs to go somewhere, which is why there are plenty of winners from the Chancellor’s announcement.

Pensioners

Labour had already committed to maintaining the triple lock on state pensions. So, while this didn’t come as a surprise, it was confirmation that pensioners are set for another above-inflation increase in 2025/26.

With the Office for Budget Responsibility (OBR) forecasting inflation to increase by 2.6% in 2025, and state pensions set for an increase of 4.1%, those in receipt could see a real term gain of 1.5%.

Workers on the national living wage

The UK’s national living wage are also in line for a significant bump, with the rate rising from its current level of £11.44 per hour to £12.21 per hour in April 2025. That represents an increase of 6.7% and will increase the income of a full-time worker on this rate by £1,400 a year.

Carers

There was no announcement to an increase in the rate of carer’s allowance, which is currently up to £81.90 per week. However, the Chancellor has increased the earnings threshold at which it is removed.

This will rise from £151 per week to the equivalent of 16 hours of the national living wage, or £195.36 from April 2025.

Drivers

Many had expected fuel duty to rise from next year. However, it was confirmed that the current rate of fuel duty will remain frozen at its current level for next year, as well as the 5p per litre cut also remaining in place.

Budget losers

Of course, there’s the other side of the £40 billion ledger. The Chancellor outlined some sizable changes to many groups, with those listed below some of the worst hit.

Investors

It was widely expected that we’d see an increase to capital gains tax (CGT), and we did. Investors will see the rates of CGT they pay increase from 10% to 18% for the lower rate, and 20% to 24% for the higher.

But while the rise was expected, the timing of it wasn’t.

Jason Hollands, Managing Director at Bestinvest's parent company Evelyn Partners says, “What is a surprise, is that the new rates apply from today. A mid-year tax rise is highly unusual and while there is precedent from former Tory Chancellor George Osborne’s June 2010 Budget, this saw the increases applied from midnight rather than the day itself. This means that anyone who sold shares this morning, hoping to avoid a hike, will probably be hit by the higher rates.”

Inheritors

The rules on inheritance tax (IHT) saw arguably the biggest overhaul, with those in line to receive an inheritance potentially major losers from this Budget.

Likely to have the biggest impact on inheritors is the removal of the exemption of defined contribution (DC) pensions from IHT as of April 2027. Previously, all assets held in a DC pension were excluded from IHT entirely. For those with other assets to fund their retirement costs, this often meant leaving pensions to grow tax-free for as long as possible, sometimes not drawing from them at all prior to death.

The IHT nil rate band of £325,000 and the residence nil rate band of an additional £175,000 have also been frozen for an extra two years, extending from 2028 out to 2030. As asset prices rise, this will likely cause more estates to fall within the bounds of IHT.

Lastly, agricultural property relief and business property relief will also see significant changes. Qualifying business assets and investments, including family farms and shares listed on the Alternative Investments Market (AIM) can currently receive 100% relief from IHT.

Under the new rules this relief will only apply to the first £1 million for agricultural relief and business property relief, with any excess receiving a 50% rate of relief from IHT. AIM shares will not receive this £1 million exemption.

Overall, estate planning will need to have a renewed focus going forward.

Employers

Inheritors have been dealt a blow, but employers might be even harder hit. In addition to the changes to business property relief affecting the passing on of family businesses, the Chancellor announced big amendments to employer national insurance (NI).

The rate at which employers pay NI contributions will be rising from 13.8% to 15% from April 2025, but for some businesses the change in earnings thresholds will be even more significant.

Currently, the earnings level at which employers need to begin to pay employer NI is the equivalent of £9,100 per year. This threshold is dropping to £5,000 per year, which could mean that for businesses who employ a large number of part-time staff, they could see employer NI obligations attached to many employees who are currently exempt.

Second-home owners and landlords

Lastly, those looking to purchase second homes or buy-to-let properties are in for a jump in the amount of stamp duty land tax they pay. The surcharge rate of stamp duty on these properties will be increasing from its current level of 3% to a new rate of 5%.

This change will come into effect from 31 October 2024, giving potential buyers no time to avoid the hike.

Sources

¹ Sky News, Budget 2024: Biggest tax rise since 1993, 30 October 2024