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The economy and fiscal forecasts

  • The Budget will raise taxes by £40bn.
  • The Office for Budget Responsibility (OBR) projects CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.
  • The cost of government borrowing will decrease, with the OBR forecasting that the government will spend less than it collects in tax by 2027. 
  • The UK economy is forecast to grow by 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029.

Taxes and duties

  • The national minimum wage will rise in April 2025 to £12.21 per hour, moving towards a single national rate. For 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10. Apprentices will receive an hourly increase from £6.40 to £7.55.
  • Carer’s Allowance will increase to the equivalent of 16 hours at the National Living Wage per week. A carer can now earn over £10,000 a year and continue to receive the allowance.
  • Spending on the state pension is projected to rise 4.1% in 2025-26, which amounts to an additional £470 per year.
  • Employers National Insurance contributions will rise from 13.8% to 15%. In addition, the threshold at which businesses start paying national insurance on employee’s earnings will be reduced from £9,100 to £5,000.
  • The Employment Allowance for smaller businesses will be increased from £5,000 to £10,500 per annum.
  • The lower rate of Capital Gains Tax will increase from 10% to 18%, and the higher rate from 20% to 24%. The rates on residential property will remain unchanged.
  • The Capital Gains Tax rates on carried interest will increase from 28% to 32% from April 2025.
  • The Stamp Duty Land surcharge for second homes will increase by 2% to 5% from 31 October 2024.
  • Enterprise Investment Scheme (EIS) to be kept until 2035.
  • The current 75% discount to business rates (due to expire in April 2025) will be replaced by a discount of 40% up to a maximum discount of £110,000.
  • The £1m lifetime allowance for business asset disposal relief will remain, with increased rates from 10% to 14% from April 2025, and 18% from April 2026 and onwards.
  • The inheritance tax threshold of £325,000 will be frozen for a further two years to 2030 and will increase to £500,000 if the estate includes a residence which is passed to a direct descendant. In addition, inherited pensions will be brought into inheritance tax from April 2027. There will also be a reform to Agricultural Property Relief and Business Property Relief.
  • Electric vehicle incentives will continue, with plans to increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025.
  • The non-domiciled tax regime will be abolished from April 2025. In its place, a new residence-based scheme with "internationally competitive arrangements" for those coming to the UK on a temporary basis will be introduced.
  • VAT on private school fees will be introduced from January 2025.
  • Air passenger duty for private jets will be increased by 50%, while an increase of no more than £2 will be introduced for economy-class short-haul flights.
  • A revised tobacco duty escalator will increase alongside RPI, plus 2%. Duties will also by increased by 10% on hand-rolled tobacco this year and a flat rate duty on vaping liquid from 2026.
  • Alcohol duty rates on non-draught products will increase in line with RPI from February 2025.
  • Fuel duty will also be frozen at its current level for a further year and maintain the existing £0.05 cut for another year, too.
  • A Covid corruption commissioner has been appointed who will work with HMRC, the Serious Fraud Office and the NCA to examine an estimated £7.6bn worth of Covid-related fraud.
  • There will be a more aggressive crackdown on tax avoidance, spotlighting promotors of such schemes.
  • A “fair repayment rate” will be introduced for those on Universal Credit, which will reduce the level of debt repayments that can be taken from a household’s Universal Credit payment each month from 25% to 15% of their standard allowance.

Public sectors and government spending

  • Defence spending in the UK is set to reach 2.5% of GDP. Defence budget to rise by £2.9bn from next year.
  • Day-to-day public spending will see an increase of 1.5% next year.
  • £500m increase for road maintenance to fix an additional one million potholes each year.
  • The NHS will receive a £22bn boost to its day-to-day health budget, along with an additional £3.1bn for its capital budget.
  • A £5bn investment will be made in housing, which includes £3.1bn for the Affordable Homes Programme.
  • The Department for Education will receive £6.7bn in capital investment, including £1.4bn to rebuild over 500 schools.
  • An extra £1bn will be allocated next year to extend the Household Support Fund.
  • Reeves has confirmed the continuation of rail projects and funding for road improvements across the UK.

If you have any questions about any of the topics in this summary do not hesitate to get in touch with our SME accounting team. Our expert advisors can help you make the right decision. Give us a call on +44 (0) 20 7759 7553 or email accounting@sableinternational.com.