Autumn Budget 2024: which taxes are going up?
Chancellor Rachel Reeves has unveiled £40 billion worth of tax hikes - here is what the Budget means for your finances
Chancellor Rachel Reeves has unveiled £40 billion of tax hikes in her Autumn Budget.
Reeves had warned of “tough choices” ahead of her first Budget today as part of efforts to plug gaps in public finances that Labour claims were left by the previous Tory government.
Prime Minister Keir Starmer and Rachel Reeves had vowed to protect “working people” by not raising income tax, national insurance and VAT.
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This prompted concerns that Reeves would tinker with pension tax relief and tax-free lump sums as well as inheritance tax and charges on capital gains.
Speaking for around an hour and 20 minutes in Parliament today, Reeves said any chancellor would “face the same reality” due to public finance shortfalls.
There was some good news, with the chancellor confirming that the freeze in income tax thresholds until 2028 won’t be extended.
Here are the taxes that are set to rise and what it could mean for your money.
Capital gains tax
There were plenty of rumours about capital gains tax (CGT) rising, with expectations that the rate could almost double.
The chancellor has opted to immediately increase the basic CGT rate from 10% to 18% and the higher rate from 20% to 24%.
These new rates will match the residential property rates, which are not changing
CGT rates for business asset disposal relief and investors’ relief will rise gradually to 14% from 6 April 2025 and match the main lower rate of 18% from 6 April 2026, the Treasury said.
Rachael Griffin, tax and financial planning expert at Quilter, said the changes will have “significant repercussions” for a wide range of investors, primarily those holding shares and may lead to reduced economic activity across key sectors.
“Higher CGT rates often result in fewer people selling their assets, as they choose to sit on them to avoid triggering the tax,” she says.
“This has the effect of locking wealth into certain asset classes, reducing the flow of capital into the economy. This behavioural shift could undermine the government’s revenue-raising objectives, as fewer transactions mean less CGT collected overall.
"However, opting to increase CGT rates but not so much as to align them with income tax rates is perhaps an attempt by the government to at least partially alleviate the issue of people sitting tight.”
Griffin said the changes will impact traditional financial planning techniques.
She adds: “Over the past few years, changes to the CGT landscape such as the significant reduction in the annual exempt amount coupled with cuts to the dividend allowance have drained the life out of general investment accounts and made ISAs, due to their tax efficiency, even more important for all.
“Similarly, for those looking for simplicity in their tax reporting, onshore bonds have once again become a more useful 'tax wrapper'. In addition, higher rate and additional rate taxpayers may use an onshore bond to help shield income yields and investment gains from higher personal rates of tax on an arising basis."
Stamp duty
Landlords and buy-to-let investors may be pleased to see that CGT rates on property won’t rise but the chancellor has dealt this cohort another blow by increasing the stamp duty rate on additional property purchases.
The additional rate of stamp duty will rise from 3% to 5% from tomorrow, adding to the cost of property investing.
This is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence, the Treasury suggests.
But estate agent Jeremy Leaf, a former RICS chairman, suggested the increase would
have a “trickle-down” effect throughout the market by reducing supply.
“The change is likely to act as a deterrent to further buy-to-let investment from the many older investors who dominate the sector,” he says.
“As a result, supply will not increase sufficiently to keep rents in check and encourage deposit saving for future first-time buyers.
“We find stamp duty presently keeps owners in homes they don’t need or want, reduces choice and inflates cost for those wanting to buy or rent, to say nothing of the effect on job and social mobility. Stamp duty could be replaced by a fairer distribution of council tax which is based on values over 30 years old, particularly for higher-end homes.”
The Budget document also didn’t include a hoped-for reversal in plans to reduce stamp duty thresholds for buyers from next year.
Simon Brown, chief executive of property data company Landmark Information Group, said: “The decision from Government to not extend existing stamp duty exemptions for primary residences will inevitably create a rush of transactions as movers scramble to complete before the proposed stamp duty deadline on 31st March 2025 – something conveyancers, in particular, are already preparing for.
“However, with average completion times already so slow, many buyers may not make the deadline, creating a ‘cliff edge’ effect. After this surge, transactions risk stalling dramatically, leaving the market in an even more fragile state. We urge the government to consider the long-term impact of this measure and focus on working with industry to improve the efficiency of the home-moving process - mitigating the market dampening.”
Employer national insurance
Labour may have so far kept its pledge to not increase employee national insurance (NI).
But Reeves did unveil a “difficult decision” to increase the rate of employer NI by 1.2 percentage points to 15%.
The threshold at which employers start paying NI will also be reduced from £9,100 per year to £5,000 per year.
These changes will apply from 6 April 2025, the Treasury said.
The government is hoping to limit the impact by increasing the employment allowance - a relief on employer NI bills - from £5,000 to £10,500 and removing the £100,000 threshold
This means that 865,000 employers will pay no NI next year, the Treasury said, but it is unclear what the impact would be for individuals who trade through a limited company.
But critics warn that higher NI costs could deter employers from taking on staff and raising pay.
Laura Suter, director of personal finance at AJ Bell, says: “While these measures are a cost increase for many businesses, it will inevitably hit the British public in their pockets as companies pass on those costs. Whether that’s lower pay rises for staff, cuts to future hiring or businesses passing on cost increases to customers.”
Romi Savova, chief executive at PensionBee, warns that an increase in the NI rate for employers poses a direct challenge not only to business sustainability but also to the financial well-being of working people.
She says: “For businesses, particularly small and medium-sized ones already navigating rising wage pressures, this added cost may threaten survival and force difficult choices.
“Ultimately, these changes act as a tax on work, with a real potential to strain the labour market, slow economic growth and reduce wage growth and generous pension contributions. It’s a straightforward economic principle: burdens on business inevitably filter down, affecting workers, growth, and, in turn, the broader health of the economy.”
Inheritance tax
The chancellor hasn’t tinkered directly with the inheritance tax (IHT) rate, which will please many.
But there are changes that could bring more estates into the tax trap.
The IHT threshold has been frozen at £325,000 until 2030.
Business property relief and agricultural reliefs have been cut. From April 2026, inheritance tax will apply after the first £1 million of business and agricultural assets.
Alternative investment market stocks will also no longer be exempt from IHT.
Additionally, pensions will form part of someone’s estate for IHT purposes from April 2027.
“Inheritance tax creates powerful emotions in people – mainly fear and loathing. Says Sarah Coles, head of personal finance for Hargreaves Lansdown.
“There’s something unpleasant about the taxman visiting the estate of someone who has died in order to fill his pockets, so it’s going to be particularly unwelcome that HMRC is set to dig deeper.
“While only 6% of the UK population is affected by IHT, that figure is on the rise. It’s only going to keep increasing now that inheritance tax thresholds have been frozen for another two years. It means heftier tax bills as the value of estates – including property – continues to climb. It means that even those people who are a long way from busting their inheritance tax limit will be anxious about these changes.”
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Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and the i newspaper. He also co-presents the In For A Penny financial planning podcast.