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QuotedData’s October 2024 budget day briefing

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As the day progresses, we’ll aim to cover the main budget-related stories here.

In QuotedData’s October 2024 budget day briefing:

  • Some measures have already been announced (and the Government has been criticised for doing so before announcing them in the House of Commons):
    • an increase in maximum single bus fares from £2 per journey to £3
    • an increase in the minimum wage of 6.7% to £12.21. Unless you are aged 18–20 in which case the rate is £10 (up 16%), or under 18 or an apprentice in which case it is £7.55 (up 18%).
    • winter fuel payments restricted to those getting pension credit or other means-tested help
    • VAT on private school fees [but no effective change for pupils with special educational needs]
    • Energy (Oil and Gas) Profits Levy to rise to 38% from 35% from 1 November 2024, and will run until 31 March 2030 (one year longer than previously)
  • £22bn black hole claim repeated
  • Specific funding for compensation for infected blood scandal £11.8bn and £1.8bn for victims of Post Office Horizon scandal
  • Budget will raise taxes by £40bn
  • Inflation forecasts are above 2.0% target for some years yet
  • GDP growth is forecast to be anaemic
  • New fiscal rules to avoid using debt for day-to-day spending, and longer term budgeting
  • COVID corruption commissioner appointed, crackdown on benefit fraud, more funding for HMRC to collect more tax
  • Boost to carer’s allowance – can earn £10,000 per year
  • Triple lock on pensions maintained [State pension will rise by 4.1% in 2025/26]
  • Fuel duty will not be increased and existing 5p cut will be retained
  • No increase to employees’ national insurance, income tax, and VAT – as flagged
  • Increase in employers’ national insurance to 15% from April 2025 (from 13.8%)
  • Reduced secondary threshold to £5,000 from £9,100 – see yesterday’s briefing [This will hit big employers]
  • Increasing employment allowance from £5,000 to £10,500 – to help small businesses [Many of these measures have the potential to put strain on small businesses, this offsets this a little. The employment allowance represents a reduction to a business’s NI bill]
  • Corporation tax capped at 25% for the life of this Parliament
  • Increase lower rate of CGT from 10% to 18%
  • Increase higher rate from 20% to 24% [This does not apply to sales of second homes, but does affect sales of shares and the like, making saving through ISAs and SIPPs all the more attractive]
  • Business Asset Disposal Relief allowed business owners to pay just 10% CGT when selling qualifying assets. That now rises to 14% next year and 18% from 2026.
  • Extended EIS and VCT schemes to 2035
  • Inheritance tax threshold of £325,000 extended to 2030
  • Inherited pensions will come into IHT [this is a big change and could raise a lot of tax, but does not apply until April 2027]
  • Agricultural and business assets over £1m will come into IHT [This was billed as protecting small farmers, but it closes one route of IHT avoidance]
  • 50% relief on IHT on AIM stocks – setting tax at 20% [the FTSE AIM Index is up 4.1% currently – and may rally further, this is a better outcome than had been expected, good news for UK small cap trusts with AIM exposure]
  • Higher tobacco taxes (RPI+2% per annum on cigarettes, a further 10% on hand-rolling tobacco, £2.2 per 10ml of vaping liquid) and air passenger duty (£2 on an short haul economy flight, £12 for long-haul destinations, and relatively more for premium economy and business class passengers), cutting duty on draught beer
  • Maintaining EV incentives in the company car tax regime and extending 100% first year allowances for zero emission cars and EV chargepoints for a further year. Investing over £200 million in 2025-26 to accelerate EV chargepoint rollout.
  • Business rates – two permanently lower tax rates for retail, hospitality and leisure – 40% relief up to a cap of £110k per business
  • Will abolish non-dom tax regime from April 2025.
  • New residence scheme to replace it – this includes ending the use of offshore trusts to shelter assets from Inheritance Tax and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime.
  • 32% CGT on carried interest [This is up from 28% and probably doesn’t shift the dial so far that it drives private equity investors away from the UK] move the carried interest taxation regime to the Income Tax framework from 6 April 2026 onwards [this could have more of an impact]
  • Extra 2% stamp duty on second homes from tomorrow [to 5%, also applies to buy-to-let properties]
  • Will not extend income tax threshold freeze beyond 2028

“Need to increase investment”

  • Debt definition to change to exclude investment
  • Government investment must earn a rate of return at least as large as gilts
  • Five-year capital budgets
  • Will captalise National Wealth Fund to fund projects
  • Funding for rural broadband
  • £5bn to fund housing
  • Reduce right to buy discounts and proceeds of sales retained by local authorities and reinvested in new housing
  • Consultation on a new long-term social housing rent settlement of CPI+1% for 5 years and maybe 10-years [This may be supportive for funds such as Triple Point Social Housing] 
  • £600m of new grant funding to help support social care, and funding to support 7,800 more homes adapted to those with social care needs.
  • Trans-Pennine upgrade and other rail projects
  • Funding for HS2 tunneling to Euston
  • Pothole funding
  • Great British Energy will be funded with £125m in 2025/26 [It doesn’t feel to me as though this poses a threat to renewable energy funds wanting to develop new projects – this is not enough money to crowd them out, but I’m still not sure exactly what this body will be doing.]
  • Funding for 11 new green hydrogen projects
  • Schools – £6.7bn funding for capital investment
  • £2.1bn for maintenance for schools
  • NHS – new 10-year plan, hospital to community, analogue to digital
  • £22.6bn increase in day-to-day funding and £3.1bn on capital spending
  • Accelerating grid connections and building new network infrastructure is central to unblocking private investment, delivering growth in clean energy industries and other growth sectors like AI, data centres, and manufacturing. The government is working with the new National Energy System Operator (NESO) and Ofgem to develop a robust grid connection process, to ensure viable projects are connected in a timely manner. [This is a key focus for renewable energy companies, but there’s no detail here to get excited about]

[Look to the Mansion House speech for the government’s vision for the financial services sector]

[Perhaps the big surprise in the statement was no mention of changes to pensions, despite many rumours to the contrary.]

[Buried in the small print]

  • Maintain subscription limits at current levels for Adult ISAs, Junior ISAs and Child Trust Funds from 6 April 2025 to 5 April 2030. Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030. [While this means that savings amounts are eroding in real terms, it gives the industry some welcome certainty]
  • The government will not proceed with the British ISA due to mixed responses to the consultation launched in March 2024.
  • Transfers of shares on PICES exempt from stamp tax [The government has been consulting on setting up a new Private Intermittent Securities and Capital Exchange System (PISCES) to trade shares in private (unlisted) companies, which would incorporate elements from public markets, such as multilateral trading, and elements from private markets such as greater discretion on what company disclosures should be made public. This seems to suggest that this is going ahead.]
  • Commitment to fully exit the NatWest shareholding and intends to do so by 2025-26 utilising a range of disposal methods, subject to market conditions and achieving value for money for taxpayers. [There is no return of the ‘tell Sid’ big public offer of shares that was mooted under the last government]
  • Considering options to strengthen the regulatory framework of the tax advice market.
  • Increase the late payment interest rate charged by HMRC on unpaid tax liabilities by 1.5 percentage points.
  • Reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts
  • The government will increase the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) for National Insurance by the September 2024 CPI rate of 1.7% from 2025-26.
  • A UK carbon border adjustment mechanism (CBAM) will be introduced on 1 January 2027, placing a carbon price on goods that are at risk of carbon leakage imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron & steel sectors. Products from the glass and ceramics sectors will not be in scope of the UK CBAM from 2027 as previously proposed. The registration threshold will be set at £50,000.

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