UK Autumn Budget 2024: Key Predictions and Takeaways for Businesses and Individuals

The UK’s Autumn Budget 2024 comes amid considerable anticipation, as Chancellor Rachel Reeves grapples with a pressing £22bn shortfall in public finances. This Budget could introduce several tax measures, aiming to navigate fiscal pressures without breaking Labour’s manifesto commitments.

Here’s a closer look at the possible changes and what they might mean for businesses, employers, and individuals.

Business Tax Expectations: Balancing Growth and Revenue

1. Business Tax Roadmap and Corporation Tax Rates

The Chancellor is expected to introduce a “Business Tax Roadmap” to provide investors and business owners with a clear direction on corporate tax policy. This document will aim to promote stability and predictability in the tax system, encouraging investment while balancing fiscal needs.

Labour’s pledge to maintain the corporation tax rate at 25% for this parliamentary term signals a stable environment for corporate tax, although any cuts appear unlikely. Full expensing allowances, capital allowances, and R&D tax credits should continue, aligning with Labour’s goal to stimulate business investment.

2. Apprenticeship Levy Reform

Labour has proposed transforming the apprenticeship levy into a more flexible “Growth and Skills Levy.” This change aims to address business complaints that the existing apprenticeship levy lacks flexibility and limits broader skills development. Reforms could enable more strategic training investments, enhancing workforce skill levels in response to evolving market needs.

3. Business Rates Overhaul

The current business rates system has long been criticised as outdated and misaligned with modern business operations, especially in sectors like digital commerce. Labour’s manifesto commits to reforming this system to create a fairer landscape for both online and physical businesses. While reforms are unlikely to yield immediate fiscal benefits, they represent an important step toward fostering a more equitable business environment.

4. Potential Bank Tax Adjustments

Although Labour has previously resisted calls to impose additional taxes on banks, some speculate that the banking surcharge could be revisited. Nonetheless, both the Chancellor and Labour leaders have indicated that increasing the tax burden on banks would conflict with their pro-business stance, so any adjustments are expected to be minor.

Individuals: Changes and Stability in Personal Taxes

1. Personal Income Tax and Thresholds

Labour has committed to maintaining current rates for basic, higher, and additional income taxes. However, fiscal drag will continue as the existing freeze on tax thresholds is unlikely to be lifted until at least 2028. This measure, while technically not a tax increase, will gradually increase the tax burden as inflation pushes more people into higher tax brackets.

2. Wealth and Asset Taxation

Despite calls for a wealth tax, Labour leaders have ruled out its introduction. However, there could be some adjustments aimed at high-net-worth individuals, such as tightening rules around the taxation of carried interest or modifying certain exemptions.

3. Pension Tax Relief and Reforms

There has been considerable discussion around pension tax relief, given the £66bn cost to the Exchequer in 2022-2023. Options on the table include introducing a flat rate for pension tax relief or reimposing the Lifetime Allowance (LTA), but these changes could face significant opposition due to their complexity and potential impact on retirement planning. Any substantial reform here could face phased implementation to minimise disruption.

4. Potential National Insurance (NI) Adjustments

Labour’s manifesto promises not to increase NI rates, but it remains unclear if this applies to employer contributions as well as employee contributions. Imposing NI on employer pension contributions could generate substantial revenue quickly, though it might discourage employer-sponsored pension schemes.

Revenue Boosters: Closing the Tax Gap

Labour aims to close the tax gap by investing in HMRC’s resources and enhancing digital capabilities. Efforts to increase staffing and conduct more extensive audits could boost revenue collection, though this approach has historically faced challenges. Further digitalisation, including potential e-invoicing mandates, could improve compliance and streamline tax collection over time.

Reforms vs. Revenue: Navigating Fiscal Demands

Labour’s budgetary approach reflects a cautious balancing act. While they face fiscal pressures, the Chancellor seems committed to honoring the manifesto’s pro-business and pro-growth commitments. By focusing on predictability and fairness rather than drastic revenue-raising measures, the Autumn Budget aims to reassure businesses and individuals alike, promoting stability in uncertain economic times.

As the UK anticipates this Budget, taxpayers can likely expect moderate adjustments but no dramatic surprises. However, the impact of existing tax freezes, modest new tax measures, and ongoing fiscal drag will still be felt across sectors, gradually reshaping the financial landscape.

Curious to explore how the Budget will affect accountants and accounting firms? Stay tuned for our upcoming blog or click here to talk to our experts.