Significant fiscal measures in first Labour budget

Autumn Budget 2024

Chancellor Rachel Reeves’ historic 2024 Budget, marking both the first Labour budget in 14 years and the debut of the UK’s first female Chancellor, has introduced significant fiscal measures impacting various sectors, particularly around taxation and public investment.

This Budget has been positioned as an “economic reset,” intending to address the £22 billion shortfall inherited from the previous government and stimulate growth by investing in essential services like the NHS and infrastructure.

Key budget changes and impacts across legal and economic sectors

Property and Inheritance Taxation

Stamp Duty

Reeves announced a further rise in Stamp Duty on second homes, increasing the surcharge to 5%. This is likely to deter property investors and second-home buyers, especially in high-demand areas like London and the South-East, where housing affordability issues are particularly pressing

Inheritance Tax (IHT)

Adjustments to IHT are notable. The freeze on the IHT threshold will extend to 2030, locking the nil-rate band at £325,000 and increasing tax liabilities as property values rise. This will draw more estates into IHT, a change expected to generate around £2 billion annually.

The chancellor also addressed “loopholes” in agricultural and business property reliefs, tightening eligibility criteria to enhance tax revenues. Starting in April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will only shield the first £1 million of eligible assets from inheritance tax (IHT). Assets above this threshold will be subject to IHT at a rate of 20%, potentially impacting the future of many family-run farms and small to medium-sized enterprises (SMEs).

Without proactive succession planning, families could face tough choices, as IHT obligations might force the sale or breakup of businesses lacking sufficient liquid assets. For those wanting to ensure a smooth transfer of their farm or business to the next generation, strategic planning and professional advice will be essential.

Business and Employment Law

Employer National Insurance Contributions

Businesses will see a 1.2% increase in employer National Insurance contributions from April 2025. While the employment allowance rises to £10,500, offsetting some costs for small businesses, this hike places added pressure on payroll costs, especially for smaller firms that are already grappling with wage increases. The National Living Wage will rise by 6.7% to £12.21, making the labour market costlier yet beneficial for low-wage workers.

Corporation Tax and Crypto-Asset Reporting

Reeves upheld the current corporation tax rates but introduced the Cryptoasset Reporting Framework from 2026, requiring firms to report on transactions, thus tightening compliance and revenue monitoring in the digital economy

Private Education and Wealth Taxes

VAT on Private School Fees

This measure, taking effect in January 2025, adds VAT to private school fees, projected to raise £1.6 billion annually, largely benefitting state education funding. The policy faces criticism, particularly from those in regions like London, where independent schooling is prevalent

Capital Gains Tax (CGT)

Immediate increases in CGT rates will impact property investors and wealthier individuals. By raising the lower rate from 10% to 18% and the upper rate from 20% to 24%, the Budget aligns CGT rates closer to income tax rates, which could influence investment behaviours

Agriculture and Environmental Law

Agricultural relief revisions

From 2026, agricultural and business property reliefs will be capped, limiting tax-free asset transfers. This, combined with proposed expansions to environmental duties like the reintroduction of fuel duty at its full rate, indicates a shift toward a more robust regulatory framework for agriculture

Broader fiscal strategy and public service investment

The Chancellor’s decision to adjust the fiscal rules, using metrics that include financial assets, enables higher borrowing for capital projects. This strategic borrowing will support the NHS with funding for new surgical hubs and radiotherapy equipment, aiming to alleviate the pressure of waiting lists and infrastructure inadequacies

Rachel Reeves’ 2024 Budget reflects her approach to address wealth disparities and inject funding into critical public services, albeit at a cost to higher earners and business owners. It presents both challenges and opportunities across sectors, with effects ranging from increased compliance costs to support for lower-income households through wage increases and enhanced healthcare infrastructure.

The full autumn statement is available here.

Please note: This is not legal advice; rather an article that is intended to provide information of general interest about current legal issues.

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