Autumn Budget, October 2024 

BPI’s Head of Policy and Public Affairs, Beth Sidwell, gives an overview of key announcements from the latest Budget. 

On the 30th October, the Chancellor of the Exchequer Rachel Reeves MP delivered her first Budget. Already set to be a significant event as the first Labour budget in 14 years, this follows the earlier Spending Inheritance Statement that she delivered in July when Labour entered office. Some announcements such as cuts to the winter fuel payment have already been made in recent months and as usual, many aspects of the budget had already been speculated or leaked in the media in advance of her speech.

The Chancellor said the Government will “invest, invest, invest” to drive economic growth, but was quick to remind the House about the “£22m blackhole” in the public finances that had been left by the last Government. She noted that the Office for Budget Responsibility (OBR) has since done a full review following the Chancellor’s initial statement in July and the recommendations of this will be implemented in full.

Rachel Reeves stressed that the scale and seriousness of the economic picture cannot be underestimated and outlined from the beginning of her speech that this Budget would raise taxes by £40bn, a reality that “any chancellor…would face”. As detail below will show, the majority of the burden for these tax rises have landed squarely on the shoulders of businesses. She looked to present that the Government was being fiscally responsible and that they would not be funding any of the day-to-day spending with borrowing.

Responding to the Budget, the Leader of the Opposition, Rishi Sunak MP said that the Conservatives had been right during the election campaign that Labour would raise the nation’s taxes and that the Labour Party did not tell the truth to the public. He also said that this anti-entrepreneurial Budget comes from a group of politicians who have no understanding of business. He added that the Government has gone on a “borrowing spree” and that the OBR forecast now shows higher inflation year-on-year, as well as debt and borrowing being higher in every year. The forecast also downgrades GDP growth when previously the UK had had the fastest growth in the G7. He accused the Chancellor of “fiscal fiddling” and that she has chosen to politicise the OBR in recent months and that they do not back her claims.

Please see a summary of the announcements of significance below:

The economy
  • The OBR forecasts the economy will grow by 1.1% in 2024, before increasing to 2.0% and 1.8% in 2025 and 2026. Growth then returns to around the OBR’s estimate of its potential rate, at 1.5%, 1.5% and 1.6% over 2027, 2028 and 2029 respectively.
  • The OBR forecasts inflation to average 2.5% in 2024, before increasing to 2.6% in 2025, and then falling to 2.3% in 2026.
Business/Employment
  • Increase the National Living Wage by 6.7% to £12.21 per hour from April 2025 and a move towards a single adult wage rate phased in over time by initially increasing the National Minimum Wage for 18–20-year-olds by 16.3%, taking it to £10 per hour.
  • Increase in employers’ National Insurance contributions from 13.8% to 15% from 6 April 2025 and reduce the Secondary Threshold, the level at which employers start paying National Insurance on each employee salary from £9,100 a year to £5,000.
  • The Government will not extend the previous Conservative Government’s freeze to income tax and National Insurance contributions thresholds. From April 2028, personal tax thresholds will be uprated in line with inflation.
  • No increase in the basic, higher or additional rates of income tax, National Insurance contributions for working people or VAT.
  • To support small businesses, the Government is increasing the Employment Allowance from £5,000 to £10,500 and removing the £100,000 threshold, expanding this to all eligible employers. The Government says this means that 865,000 employers will pay no National Insurance contributions next year. Additionally, the small business tax multiplier will be frozen for 2025/26.
  • Increase in the lower rate of Capital Gains Tax from 10% to 18% and the higher rate from 20% to 24% for disposals made on or after 30th October 2024. The Government says this will ensure that asset owners pay their “fair share” whilst keeping the UK tax system internationally competitive, with lower rates than comparable EU countries.
  • Cap the rate of Corporation Tax at 25%, still the lowest in the G7, for the duration of the Parliament.
  • Maintain the lifetime limit for Business Asset Disposal Relief at £1m. It will remain at 10% this year before rising to 14% from 6 April 2025 and 18% from 2026-27.
  • Maintain full expensing, the Annual Investment Allowance, and R&D relief rates.
  • Extend the Enterprise Investment Scheme and Venture Capital Trust Schemes to 2035, as already announced.
  • The Government has already introduced the ‘Employment Rights Bill’ on 10 October 2024, a piece of legislation it says will modernise the UK’s employment rights framework in response to the changing world of work, including by making flexible working the default, establishing a new right to bereavement leave, and making paternity and parental leave available from day 1 of starting a new job.
  • Maintain electric vehicle incentives in the Company Car Tax regime and extending 100% First Year Allowances for zero emission cars and electric vehicle charge points for a further year.
Creative Industries
  • The Government says the creative industries will see £15bn of support over the next 5 years.
  • As previously announced by the last Government and legislated for, this includes the Orchestra Tax Relief which will be set at 45% from 1 April 2025, as well as the Theatre Tax Relief (40% for non-touring productions and 45% for touring productions). These rates apply UK-wide.
  • Introduce permanently lower Business Rates for retail, hospitality and leisure from 2026/27 which will be funded by a higher multiplier for the most valuable properties. In the short term, eligible businesses will receive 40% relief on Business Rates liability, up to a cash cap of £110,000 per business. This is a reduction from the previous 75% rate relief which expires on 31st March.
  • The Government will legislate to provide additional tax reliefs for visual effect costs in tv and film. This is following a previous consultation held by the last Government.
  • £25m of funding for the North East Mayoral Combined Authority to remediate the Crown Works Studios site in Sunderland. The Government says this will support the North East’s creative industries and is expected to lead to around 8,000 new jobs in the region.
  • From February 2025, there will be a cut in alcohol duty on draught products but an increase on non-draught products in-line with inflation. A continuation of alcohol duty freezes has been lobbied for by grassroots music venues.
  • As announced by the previous Government, starting on 1st April 2025, an enhanced tax credit of 53% will be introduced for UK independent film productions with budgets under £15m. Additionally, the credit rate for visual effects costs in film and high-end TV will increase to 39% and the 80% cap on qualifying expenditure for visual effects costs will be removed.
Education
  • “Broaden and diversify the talent pipeline” in the creative industries by providing £3m to expand the Creative Careers Programme, which the Government say will give school children the opportunity to learn more about career routes and directly engage with the workplace.
  • From 2023/24 to 2025/26, an additional £300m for further education (post-16)
  • Reforming the Apprenticeship Levy into a Growth and Skills Levy through £40m investment
  • Provide £6.7bn of capital funding in 2025/26 for the Department of Education in England, a real terms increase of 19% from 2024/25. This includes £2.1bn to improve the condition of the schools, and £950m for skills capital, including £300m of new funding to support colleges to maintain, improve and ensure suitability of their buildings.
  • From 1 January 2025, all education services and vocational training provided by a private school in the UK for a charge will be subject to VAT at the standard rate of 20%. This will also apply to boarding services provided by private schools.
Government Departments
  • 2% productivity, inefficiency and savings target for all departmental budgets next year which will be achieved by better use of technology and joining up services across government
  • For 2025/26, £2.3bn (2.6% increase) for the Department for Culture, Media and Sport. This still puts DCMS funding as significantly one of the lowest across Government.
  • Day to day spending from 2024/25 onwards will grow by 1.5% in real terms and departmental spending will grow by 1.7% in real terms
Wider
  • Abolition of the non-domiciled tax regime and replacing it with a new residence-based system.
  • Freeze fuel duty and extending the temporary 5p cut for one year.
  • The current inheritance tax thresholds were already due to be frozen until April 2028, this has been extended to April 2030 but there are changes pensions eligibility.
  • Transport investment around West Yorkshire including delivering the Transpennine Route Upgrade between York and Manchester, via Leeds and Huddersfield, and maintaining momentum on Northern Powerhouse Rail by progressing further planning and design works to support future delivery. This will have a beneficial impact on BPI’s work in West Yorkshire to open a new specialist creative school.

 

If you have any questions or would like to discuss how this may impact you or your business, then please feel free to contact the Public Affairs team via [email protected].