October 30th 2024.
As the first budget of the Labour government, Chancellor Rachel Reeves delivered the Autumn Budget of 2024 in a speech to Parliament on Wednesday. This highly anticipated budget includes significant changes to National Insurance, Capital Gains, and even the prices of pints and tobacco. While some will benefit more than others, there are also those who will find themselves worse off due to these changes.
So, who are the winners and losers from the Labour government's first budget? Let's take a closer look.
Winners:
One of the biggest winners of this budget are minimum wage workers, as the minimum wage is set to increase by 6.7% to £12.21 per hour next year. This means that full-time workers on minimum wage will see an extra £1,400 in their yearly income. While this is a significant step towards a genuine living wage for working people, it falls short of the £12.60 per hour living wage calculated by the Living Wage Foundation. Additionally, the increase for younger workers aged 18-20 is even less, with their hourly wage rising by £1.40 to £10.
Another positive announcement from the budget is the increase in the earnings limit for carers. They will now be able to earn over £10,000 a year without losing their carer's allowance. This means that carers can work up to 16 hours a week at minimum wage and still receive their allowance. Chancellor Reeves stated that this increase, the largest since carer's allowance was introduced in 1976, will provide carers with more financial freedom and allow them to work more if they choose to.
On the other hand, there are also losers from this budget. The decision to scrap the winter fuel payment for pensioners, unless they receive a means-tested benefit, has drawn opposition earlier this year. While state pensions are set to rise by 4.1% next year, with pensioners receiving £230.30 each week as the new flat-rate benefit, those with income thresholds will still face a freeze and be taxed on their income from 2027.
The government has also made the difficult choice to cut a penny off draught beer duty, which is good news for pub-goers. However, there is no guarantee that pubs will pass on the savings to customers. There is also a freeze on fuel duty, which means that drivers will continue to benefit from the 5p-per-litre cut introduced by the Conservatives in 2022. However, this freeze also means that the government will miss out on £3 billion in tax revenues that could have been spent elsewhere.
Losers:
For families dealing with inheritance, this budget has not been kind. From April 2027, they will have to pay inheritance tax on inherited pension pots, and the inheritance tax threshold, which was due to expire in 2028, has been extended to 2030. In addition, relief on inheritance of agricultural land and family businesses will also be capped, even though they were previously exempt from tax.
Some of the announcements from the 2024 Budget have proved to be controversial. Employers will now have to pay national insurance contributions that are 1.2 percentage points higher than before, starting from April. Chancellor Reeves also announced a reduction in the secondary threshold, which is the level at which employers start paying national insurance, from £9,100 per year to £5,000. This is expected to raise £25 billion per year by the end of the forecast period, but it was a difficult decision for the government to make.
Additionally, investors will also face a tax hike, with the lower rate of Capital Gains Tax increasing from 10% to 18%, and the higher rate rising from 20% to 24%. This tax is charged on the profit from selling assets that have increased in value, such as stocks and second homes. Speaking of second homes, landlords will also be hit with a higher stamp duty land tax surcharge, which is rising by two percentage points to 5%.
In an effort to cut smoking, the government has also targeted smokers and vapers as losers in this budget. The tax on hand-rolling tobacco will increase by 10%, and a flat rate levy will be imposed on all vaping liquids starting from October 2026. Lastly, the government has announced the abolishment of the non-dom tax regime from April 2025, stating that those who make Britain their home should pay their tax here.
In conclusion, the Autumn Budget of 2024 has brought about many changes, some of which have been received positively, while others have been met with criticism. It is clear that the Labour government is committed to raising funding for public services, but it remains to be seen how these changes will ultimately affect the people of Britain.
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