Understanding Budget 2024: Highlights from Rachel Reeves’ Address
As we look ahead to Budget 2024, Rachel Reeves’ recent speech illuminated several pivotal changes that are set to impact both businesses and individual taxpayers. Here’s a comprehensive breakdown of the core points.
Business Taxation Changes
In a significant shift for companies, the threshold for paying National Insurance on employee earnings will be adjusted. Effective April, firm will now incur National Insurance charges on earnings exceeding £5,000, compared to the current threshold of £9,100. This adjustment will be accompanied by an increase in the National Insurance rate from 13.8% to 15%.
To ease this burden, the Employment Allowance, which allows businesses to decrease their National Insurance contributions, will rise from £5,000 to £10,500.
Moreover, the main rate of corporation tax—which applies to businesses with taxable profits exceeding £250,000—will remain steady at 25% until the next election. The Business Asset Disposal Relief will continue, with an incremental change to Capital Gains Tax (CGT) postponed; rates are projected to increase to 14% in April 2025 and 18% in 2026-27.
Personal Taxation Updates
For individual taxpayers, the freeze on income tax and National Insurance thresholds will remain in effect until 2028, ensuring that rising wages won’t unintentionally push taxpayers into higher tax brackets.
Additionally, there’s set to be an increase in the Capital Gains Tax on profits from share sales, climbing from a maximum of 20% to up to 24%. However, rates for gains from the sale of additional properties will remain unchanged.
Lastly, the freeze on inheritance tax thresholds has been extended, pushing it beyond 2028 and now targeting 2030 for a review.
These measures collectively aim to shape the financial landscape for both businesses and individuals as we navigate the coming years under Budget 2024. Stakeholders are encouraged to stay informed and prepare for these changes as they unfold.
One Comment
This is a thorough breakdown of the key points from Rachel Reeves’ speech on Budget 2024. It’s particularly interesting to see the adjustments in National Insurance thresholds and rates, as these changes could significantly affect small businesses trying to navigate a challenging economic landscape.
While the increase in the Employment Allowance from £5,000 to £10,500 is a positive step for many employers, it will be essential to monitor how these National Insurance alterations impact hiring decisions and wage structures. Small businesses, especially, might feel the squeeze from the lower threshold, which could lead to tightening budgets or difficult decisions regarding staff expansion.
Furthermore, the freeze on income tax and National Insurance thresholds until 2028 is also crucial. While it may help avoid ‘bracket creep,’ it raises questions about how this will affect the overall disposable income of taxpayers, especially in times of rising inflation.
Another point worth considering is the delayed increases in Capital Gains Tax, which could lead to strategic shifts in how individuals manage their investment portfolios. With these changes on the horizon, it will be vital for stakeholders to not only adapt to the new tax obligations but also seek advice on optimizing their financial strategies to mitigate any negative financial impacts. Engaging in discussions about these upcoming changes and exploring innovative solutions could be beneficial for both businesses and individual taxpayers alike.