Chancellor Rachel Reeves announced a range of fiscal adjustments in the Autumn Budget, focusing on employer contributions and personal tax thresholds to sustain essential funding. Employer National Insurance Contributions (NICs) will increase by 1.2 percentage points, reaching 15% in April 2025. Additionally, the secondary threshold for NICs will decrease from £9,100 to £5,000, which is anticipated to raise £25bn annually.
Income tax and NIC personal thresholds will rise with inflation from 2028/29 to alleviate fiscal drag and protect taxpayers from moving into higher tax bands. Capital gains tax rates will also increase: the basic rate will move to 18% from 10%, while the higher rate will climb to 24%. Notably, selling second homes remains subject to the unchanged 18% and 24% rates.
Inheritance tax will see a freeze on the £325,000 threshold, extended to 2030, and starting in 2027, inherited pension pots will be taxed. Business and agricultural assets will now attract a 20% inheritance tax for values above £1m.
In employment, the national living wage for people over 21 will increase by 6.7% to £12.21, equivalent to an annual increase of £1,400 for full-time workers. A phased single-adult rate will eventually standardise minimum wages for those under 21.
In education, VAT will apply to private school fees from January 2025. Reeves also pledged £6.7bn in capital investment for the Department for Education, covering £1.4bn for critical school rebuilds. The schools’ budget rises by £2.3bn, with additional funding for teacher hiring, maintenance, special educational needs, and higher education.
Housing support includes a £5bn investment in 2025/26 to boost affordable housing supply and hire hundreds of new planning officers. Local governments will keep profits from council housing sales, promoting reinvestment, and right-to-buy discounts will be reduced.
On energy, Reeves announced the £3.4bn Warm Homes Plan to improve building efficiency. Great British Energy, a new national body, will be headquartered in Aberdeen.
Retail, hospitality, and leisure businesses will benefit from a 40% business rate relief cap of £110,000 until 2026/27, after which rates will be permanently lowered. The Employment Allowance for smaller businesses will double from £5,000 to £10,500, alleviating NIC pressures.
Further changes include increasing taxes on carried interest from 28% to 32%, extending the oil profits levy to 38%, and eliminating non-domicile residency status from April. The Government also aims to stabilise inflation by around 2%, with GDP growth expected to average 1.6% annually up to 2030.
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