Today’s Autumn Budget, delivered by Labour’s Chancellor Rachel Reeves, marks the first Labour Budget since 2010 and the first ever by a female Chancellor. The Budget centres on two core goals:
- Tackling a £40bn deficit in the Whitehall budget through tax adjustments and spending cuts, partly addressing a £22bn shortfall from the previous Conservative government and covering additional funding for schools, hospitals, and defence.
- Boosting public investment with a borrowing cap increase of up to £53bn to support a variety of infrastructure projects.
The Chancellor opened by committing to avoid austerity, instead aiming to “restore economic stability” and “rebuild Britain.” She outlined Labour’s vision of sustainable growth to generate more money in people’s pockets and ensure essential services, particularly the NHS, are accessible and dependable.
Key Budget Announcements for Individuals and Businesses
Business Rate Adjustments and Small Business Support
Employment allowance will increase from £5,000 to £10,500, allowing over 865,000 small businesses to avoid National Insurance contributions on their first four employees. For other businesses and most importantly Contractors whom only have themselves as the sole employee, employer National Insurance contributions will increase slightly from 13.8% to 15%.
Tax Overhaul on Capital Gains, Inheritance, and Non-Domiciled Individuals
Capital Gains Tax will see a gradual increase, with the abolition of the non-dom tax regime in 2025, replacing it with a more residence-based model. Inheritance tax allowances for Agricultural and Business Property Reliefs will also be revised, maintaining tax-free benefits up to £1 million but applying 50% relief above that.
The inheritance tax threshold freeze has been extended by two more years, now lasting until 2030. This allows the first £325,000 of an estate to remain tax-free, increasing to £500,000 if the estate includes a main residence passed to direct descendants, and up to £1 million when transferred to a surviving spouse or civil partner.
Inflation and Economic Stability
Reeves projected that inflation, which reached 11% during the recent Cost of Living Crisis, will stabilize. The OBR predicts inflation will average 2.5% in 2024, gradually tapering to 2% by 2029, while GDP growth is expected to increase from 1.1% in 2024 to 1.6% by 2029. Labour aims to shift from short-term measures toward stable, long-term economic expansion.
Tax Compliance and Employment Initiatives
A series of measures target tax evasion and fraud, including modernising HMRC’s systems and cracking down on tax avoidance. The government also plans a “Get Britain Working” initiative to help unemployed individuals re-enter the workforce, alleviating strain on the benefits system and boosting overall employment.
Minimum Wage and Carers’ Allowance Increases
Starting in April, the National Minimum Wage will increase by 6.7% to £12.21 per hour, with wages for younger workers increasing to £10 an hour. Carers’ allowance will be tied to National Living Wage levels, allowing eligible carers to receive more income support.
Fuel Duty and State Pension Protection
The Chancellor confirmed a freeze on fuel duty next year, keeping the 5p duty cut in place. State pension spending will rise by 4.1% in 2025-26, offering an increase of £470 to over 12 million pensioners. Additionally, there will be no changes to individual VAT, National Insurance, or income tax rates.
New Industry-Specific Levies
A 38% windfall tax on oil and gas profits will extend through 2030, eliminating previous investment allowances in this sector. Incentives to support electric vehicle adoption and charging infrastructure will also continue, while additional levies will target second homes, luxury travel, and tobacco.
Investments in Education, Healthcare, and Defence
Schools and healthcare received significant funding commitments, with £2.3bn added to the schools’ budget and over £30bn invested in healthcare to reduce NHS waiting lists and increase care capacity. Defence spending will also rise, with annual allocations to support Ukraine and modernize the UK’s military as part of NATO commitments.
What This Means for Small Businesses and Freelancers
The Budget holds important implications for small businesses, freelancers, and contractors. National Insurance changes and business rate discounts may offer savings, while adjustments to Capital Gains Tax and inheritance regulations could affect those with broader investment portfolios and those looking to retire.
If you have questions on how the new Budget impacts your tax, compliance, or financial planning, our team of accountants are available to provide tailored guidance—schedule a call with us today to get started.
