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Autumn Budget 2024: what changes did Rachel Reeves announce?
The Chancellor raises taxes by £40bn, but announces end to income tax threshold freeze
Chancellor Rachel Reeves hailed her Autumn Budget – the first for the new Labour government – as a plan to 'fix the foundations and deliver change', as she unveiled a widespread package of tax changes and investment plans.
During her statement in the House of Commons today (30 October), Reeves announced the government will raise taxes by £40bn, with capital gains tax and employer National Insurance measures topping the bill.
Here, we take a closer look at what was included in the speech, and how it will affect your finances.
Autumn Budget 2024: the key tax changes
The Chancellor pledged not to increase taxes on 'working people', and ruled out tinkering with income tax thresholds. She did, however, announce the following changes:
Inheritance tax (IHT) freeze
IHT is levied on anything over £325,000 in your estate. This rises to £500,000 if the estate includes a residence passed to direct descendants and £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
The current IHT thresholds were due to be frozen until 2028, but this will be extended until 2030.
Inherited pensions will also be liable for IHT from April 2027.
- Find out more: what is inheritance tax?
Capital gains tax (CGT)
CGT is charged on profits made from selling an asset, such as a second property or valuable possession.
The Chancellor announced that CGT rates on assets will be increased from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers.
This brings the rates into line with those for residential property, which will remain at 18% and 24%.
The change will take place with immediate effect.
- Find out more: capital gains tax rates and allowances
Income tax and National Insurance freezes to end
The Chancellor will end the freeze on income tax and National Insurance thresholds, which was introduced by the previous government.
From 2028-29, personal tax thresholds will be increased in line with inflation.
The freeze was often referred to as a 'stealth tax' because it led more people to be pulled into higher tax bands as their income increased.
National Insurance increase for employers
The government will increase National Insurance (NI) contributions for employers from 13.8% to 15% from 6 April 2025.
The threshold for when employers need to start paying the tax will be lowered from £9,100 to £5,000.
- Find out more: use our National Insurance calculator
Other tax changes
The Chancellor also announced the government will make good on its pledge to abolish the non-dom tax regime and replace it with a new residence-based scheme.
This means UK residents who have a permanent home outside of the UK for tax purposes will no longer receive tax breaks on money made elsewhere in the world.
The government says it will also deliver its manifesto promise to introduce VAT on private school fees from 1 January 2025.
Housing – extra funding and rules shake-up
From 31 October, buyers of second homes will pay more in stamp duty.
The stamp duty surcharge, which is paid on top of the standard rates, will increase from 3% to 5%.
Reeves also announced the following changes intended to improve housing in the UK and increase access to affordable homes:
- Affordable homes: £5bn will be invested to deliver the government's housing plan. This figure includes £3.1bn to the Affordable Homes Programme. £500m will also be invested to build 5,000 new affordable social homes.
- Social rent: the government will consult on increasing annual rents on social housing in England by the Consumer Price Index (CPI) measure of inflation, plus an extra 1% for the next five years.
- Right to Buy rules: discounts for council tenants who want to purchase their own home through the Right to Buy scheme will be slashed. Councils will retain full receipts from sales to reinvest in housing stock and increase supply.
- Cladding removal: £1bn will be provided to accelerate the removal of dangerous cladding on homes, following the Grenfell Tower report.
State pension rise
The state pension will increase by more than £460 in 2025-26, thanks to the 'triple lock'.
This policy, which the new government has promised to keep in place, dates back to 2010.
It guarantees that state pension payments will be boosted each year by either September’s inflation, earnings growth (from the period between May to July) or 2.5%, whichever is highest.
The Chancellor has now confirmed a rise of 4.1% from April 2025, in line with earnings growth.
- Find out how much state pension you will get in 2025-26
Minimum wage rise
The minimum wage will increase by 6.7%. This means a worker over the age of 21 will see their hourly rate rise from £11.44 to £12.21.
Workers aged 18 to 20, who currently get a lower rate of £8.60 per hour, are also in line for a boost. The Chancellor says the minimum wage for the youngest employees will rise to £10 per hour. Apprentices will see the rate go up from £6.40 to £7.55 an hour.
Fuel duty stays frozen
Rates on fuel duty – a tax included in the price you pay for petrol, diesel and other fuels – will be kept the same in the next financial year.
The temporary 5p per litre cut introduced in 2022 will remain for one more year.
Tax on flights
The government will increase Air Passenger Duty (APD) for short-haul, economy-class travellers by no more than £2. However, private jets will see an increase of 50%, equivalent to £450 per passenger.
APD is a tax paid by customers when they book a flight and is calculated based on the distance travelled.
'Sin tax' changes
Tobacco duty will rise by the Retail Price Index (RPI) measure of inflation, plus 2%. Duty on hand-rolling tobacco will rise by a further 10%. These changes will come into force from 6pm on 30 October.
From 1 Oct 2026, a new flat vaping duty will also be introduced, levied at £2.20 per 10ml of liquid. There will also be a one-off increase of £2.20 per 100 cigarettes/50g of tobacco.
There was also bad news for drinkers, who will see alcohol duty rise in line with September's RPI rate of inflation, which stood at 2.7%. That will kick in from 1 February 2025.
However, alcohol duty rates on draught products below 8.5% alcohol by volume (ABV) will be cut by 1.7%, reducing the amount of tax on an average-strength pint by 1p.
