Autumn Budget Overview
The Autumn Budget, presented by the New Labour government, marks their first full budget and aims to establish a comprehensive financial plan for the future. For a complete review of the Autumn Budget, you can find all the information announced here. This budget includes forecasts extending over the next three to five years, outlining the government's economic priorities and strategies.
Inflation and Growth Forecasts
The government has set an inflation target of 2% over the next 10 years. The Office for Budget Responsibility (OBR) predicts average inflation to be 2.5% in 2024, 2.6% in 2025, 2.3% in 2026, and 2.1% in 2027. UK growth is expected to be 1.1% in 2024, 2% for 2025, and 1.8% in 2026. These forecasts provide a framework for economic stability and growth.
Taxation and Spending Cuts
Key budget announcements include plans to raise approximately £40 billion through taxation and spending cuts. Specific allocations include £11.8 billion for the infected blood scandal and £1.8 billion for the post office scandal. These measures reflect the government's commitment to addressing past injustices and ensuring fiscal responsibility.
HMRC Systems
The budget includes a review of HMRC systems, focusing on umbrella companies and increasing the percentage chargeable on outstanding tax debt. This review aims to enhance the efficiency and fairness of the tax system.
National Minimum Wage
Rate
| Increase (£)
| Percentage Increase (%)
| |
21 and over
| £12.21
| £0.77
| 6.7%
|
18 - 20 years
| £10.00
| £1.40
| 16.3%
|
16 - 17 years
| £7.55
| £1.15
| 18%
|
Apprentice
| £7.55
| £1.15
| 18%
|
Accommodation
offset
| £10.66
| £0.67
| 6.7%
|
Changes to National Insurance
Employers NI Increase
The Employer National Insurance (NI) contribution rate will increase from 13.8% to 15%, representing a rise of 1.2%.
Employer's NI Secondary Threshold Decrease
The Employer's National Insurance secondary threshold will be lowered from £9,100 to £5,000, meaning contributions will apply to an additional £4,100 of earnings.
Employment Allowance & Threshold
The Employment Allowance will increase from £5,000 in April 2024 to £10,500 in the upcoming tax year. Additionally, the £100,000 threshold will be removed.
Other rules will remain in place as per the HMRC guidance, you can check eligibility here: https://www.gov.uk/claim-employment-allowance/eligibility
Statutory Sick Pay (SSP)
Currently, there is a three-day waiting period for Statutory Sick Pay (SSP) to take effect, and employees earning less than the Lower Earnings Limit (LEL) per week are ineligible. The Autumn Budget document states that these changes should be implemented "immediately," with full implementation likely by Spring 2025. Consequently, absence policies and payroll systems will need to be amended and adjusted accordingly.
Employee Protection and Paternity/Maternity Access
The budget introduces enhanced protection against unfair dismissal for employees and initiates a review to improve access to paternity and maternity benefits. This review will consider eliminating the Lower Earnings Limit (LEL) for statutory payments, thereby providing greater support for working families.
Paternity Leave: Parents will be eligible for paternity leave from the first day of employment, with implementation expected by Spring 2025. Current policies will need to be updated and communicated to line managers.
Carers Allowance and Household Support Fund
Changes to the carers allowance will align it with the National Minimum Wage, and an additional £1 billion will be provided to the Household Support Fund. These measures are designed to support vulnerable populations and address the cost-of-living crisis.
Universal Credit Debt Repayment
The debt repayment rate for Universal Credit payments will be reduced from 25% to 15%, driven by the cost-of-living crisis. This reduction aims to alleviate financial pressure on low-income households.
State Pension Triple Lock
The state pension will remain under the triple lock with Labour, with an expected increase of 4.1% for 2025. This commitment ensures that pensioners' incomes keep pace with inflation and wage growth.
Capital Gains and Inheritance Tax
Capital gains tax rates will increase from 10% to 18% and from 20% to 24%, depending on the type of asset. The inheritance tax threshold freeze has been extended to 2030, and inherited pensions will be included by 2027. These changes aim to increase tax revenues and ensure fairness in the tax system.
Corporation Tax and Stamp Duty
The main rate of corporation tax on profits over £250,000 will stay at 25% until after the next election. Stamp duty on the sale of second homes will increase from 3% to 5% starting November 1. These measures are intended to maintain corporate tax revenues and address housing market issues.
Additional Changes
Windfall Tax and VAT on Private School Fees
| The windfall tax on energy company profits will increase to 38%, and VAT will be added to private school fees in 2025. These changes aim to ensure that profitable sectors contribute fairly to public finances. |
Alcohol, Soft Drinks, and Fuel Duties
| Alcohol duty will increase by the retail price index, and the soft drinks levy will be adjusted. Fuel duty will be frozen for 12 months, providing some relief to consumers amid rising living costs. |
Tobacco and Vaping Taxes
| Tobacco duty will increase, and a flat rate excise duty on vapes and juices will be introduced by October 2026. These measures aim to reduce smoking rates and regulate the vaping market. |
Air Passenger Duty
| Air passenger duty on economy flights will increase by no more than £2 per flight, with a 50% increase for private jet flights. These changes are part of efforts to make air travel more environmentally sustainable. |
Electric Vehicle Tax
| Car tax for electric vehicles will commence in April 2025, with a full company car review expected in 2028. This tax aims to ensure that electric vehicle owners contribute to road maintenance and infrastructure. |
For further guidance on how these changes might affect your business and payroll management, kindly refer to the full Autumn Budget from HMRC.
The Pay Check Team
paycheck@paycheck.co.uk
+44 (0) 20 7866 4600