What the Autumn Budget 2024 Means for Your Personal Finances

In a bid to repair the country’s "broken" public services and put its finances on firmer ground, UK Chancellor Rachel Reeves has announced the biggest £40bn tax hike since 1993, squarely targeting businesses and the affluent. She is combining the increases with a steep surge in borrowing to funnel an additional £100bn into capital projects over the next parliamentary term.

Here is a breakdown of the Budget’s main measures and how they will hit your personal finances.

National Living Wage

The national living wage (NLW) will rise to £12.21 per hour for workers aged 21 and older in April 2025, a 6.7% jump. For those aged 18 to 20, the hourly rate will leap by £1.40 to £10.00. The NLW was launched in 2016 at £7.20 for those 25 and older.

Taxes

Central to the Autumn Budget is a 1.2% rise in Employer’s National Insurance to 15%. The threshold at which businesses start paying that tax will also drop from £9,100 to £5,000, pulling even smaller employers into the fiscal dragnet. Economists warn the tax hike would hit workers with lower wages and consumers with higher prices.

The measures, set to take effect from April 2025, are projected to deliver £25bn annually by the time the Office for Budget Responsibility’s forecast period concludes.

In a surprise that few saw coming, Chancellor Reeves has decided not to extend the freeze on income tax thresholds. The freeze, introduced by her predecessor in April 2021, had swept millions of workers into higher tax brackets over the years. Now, however, Reeves says from 2028-29 those thresholds will climb in line with inflation. This should help workers keep more of their earnings as the cost of living rises.

For now, Personal Allowance remains frozen at £12,570, while the higher-rate threshold at £50,270. And for the highest earners, the 45% tax rate kicks in at £125,140.

Then there’s the Inheritance Tax (IHT) overhaul. Starting in April 2026, full relief from inheritance tax on agricultural and business property will be capped at £1 million. For assets surpassing that amount, relief shrinks to 50%, resulting in an effective 20% tax rate.

Reeves also announced an extension of the IHT threshold freeze at £325,000 from 2028 to 2030. This means more estates will drift into taxable territory as inflation edges property values upward.

Reeves’ Budget also took aim at private equity fund managers with taxes on their profits climbing from 28% to 32% come April 2025. Meanwhile, the VAT exemption on private school fees will vanish in January 2025.

And air passenger duty will tick up across the board: an extra £1 on domestic flights, £2 for short-haul hops abroad and £12 for long-haul journeys. Premium economy and business class passengers will see even more hikes with all rates tied to retail price inflation from 2027. But private jet owners get the most punitive blow with their duty jumping by 50% in 2026.

Investment

Chancellor Reeves has lifted the lower rate of Capital Gains Tax (CGT) from 10% to 18%, while the higher rate will climb from 20% to 24%, bringing it in line with property assets. It took effect from 30 October 2024.

Property

The Stamp Duty Surcharge for Buy-to-Let and second homes will rise by 2% to 5%, effective immediately. The chancellor left CGT on residential property untouched at 24%. But in April 2025, temporary Stamp Duty breaks will end, snapping back thresholds to £125,000 from £250,000 for general buyers and £300,000 from £425,000 for first-timers.

Pensions

Chancellor Reeves has vowed to close the “loophole” on inherited pensions from April 2027 to prevent them from being stashed away tax-free by wealthy heirs. Pensions will now be treated as part of an individual’s estate for IHT purposes, a move projected to rake in £640 million in 2027/28 alone, and balloon to £1.46 billion by 2029-30. Transfers to spouses and civil partners will, however, remain shielded from this clampdown.

Reeves also announced a 4.1% hike in the state pension for April 2025, adding up to £470 annually for 12 million pensioners. The standard minimum guarantee for pension credit will rise by 4.1%, raising the floor for a single pensioner from around £11,400 to £11,850 annually. The hikes, outpacing the 1.7% rise in working-age benefits, are being framed as a counterbalance to the loss of winter fuel payments for many pensioners this November and December.

Childcare

The government is dangling £1.8 billion to expand childcare pledging 30 hours of free care for children over nine months old, to start in September 2025. Education Secretary Bridget Phillipson has declared that 300 new state-funded nurseries will open, mostly by repurposing empty school classrooms.

Conclusion

Chancellor Rachel Reeves' new Budget is a big change for the UK's finances, introducing a £40 billion tax increase to revamp public services and placing the burden on businesses and wealthy individuals. She is closing tax loopholes and raising taxes on capital gains, private equity profits and air travel.