Autumn Budget 2024: A Budget of Managed Expectations
Tony Medcalf · Posted on: October 30th 2024 · read
We were always anticipating a fundamental shift in approach from this first Labour budget. Every election since 1992, with the exception of 2017, has been followed by tax rises, something the prime minister and chancellor have been priming us for since taking office in July.
Such was our preparedness for tax hikes, the budget contained few surprises, and this was a very deliberate attempt to set the tone for the rest of this parliament.
We know from recent budget experience, namely the Liz Truss and Kwasi Kwarteng fiscal event of 2022, that the international finance community doesn’t like surprises. It feels like Ms Reeves’ stability-first message was designed with this audience in mind.
But while the markets may be content, I suspect the owner-managed business community will be feeling rather less assured.
A setback for employers and wealth creators
It was widely expected, but confirmation of the increase in employer national insurance contributions (NICs) by 1.2% from April 2025, and the reduction in the employer NIC threshold, will be unwelcome for those looking to scale, grow, and invest in a business by creating jobs and raising wages.
In fact, there wasn’t much in the budget for business owners to take encouragement from. The plans to further increase minimum wage rates on top of the rise in employer NICs, will be seen as a double whammy for those businesses looking to create jobs.
The increase in the headline rate of capital gains tax from 20% to 24%, including an increase in the rate Business Asset Disposal Relief from 10% to 18%, may be viewed as another deterrent to people looking to scale and ultimately exit a business.
One sigh of relief for growing business owners will be that the chancellor didn’t make any immediate changes to the generous capital allowances regime, including the rules on first-year full expensing. The current rules allow businesses 100% tax relief on investments made in qualifying plant and machinery until the end of March 2026. The extension of business rates reliefs will be welcomed by businesses in the retail, leisure and hospitality sectors.
The flip side to the £40bn of tax rises outlined by the chancellor is Chancellor Reeves’ plans for investment and growth. The Office for Budget Responsibility’s outlook is that these investment and spending plans will improve the UK’s growth prospects, rather than harm them, and any additional boost to UK GDP has to be viewed as a good thing.
The increase in the headline rate of capital gains tax from 20% to 24%, including an increase in the rate Business Asset Disposal Relief from 10% to 18%, may be viewed as another deterrent to people looking to scale and ultimately exit a business.
A hopeful future?
Labour pitched this budget as one of “responsible action” to improve the public finances and “avoid crippling austerity”. Ms Reeves set new tax and spending rules as part of this philosophy, including ensuring all day-to-day government spending is met by money raised from taxes.
Given the election manifesto pledges made by Labour, businesses and the wealthy were always going to take the brunt of tax rises. However, I imagine many small business owners will feel aggrieved about not falling into Labour’s classification of working people.
The prime minister has sought to balance the messaging around tax rises by saying “better days are ahead”, though I’m not sure this budget did enough to build hope for hard-working owner managers and entrepreneurs.
On the other hand, it has delivered on Labour’s aspiration to show that government is steadying the UK economy. Businesses will at least take some comfort from the certainty provided by this longer-term approach.
Stay updated with MHA
Throughout the Autumn Budget, our tax experts and industry specialists have been sharing their insights on the measures announced that effect both businesses and private individuals.
Stay updated on the latest developments right here on our dedicated Autumn Budget hub.
