Autumn Budget 2024: Five key points and what they could mean for your finances

How will measures announced in the Autumn Budget affect savers, mortgage borrowers and pensioners?

A rise in employers' National Insurance and a hike to Capital Gains Tax (CGT) were among measures unveiled in the Autumn Budget, as the Government seeks to “fix the foundations” of the country.

The first Labour Budget in almost 15 years was set against the backdrop of an inherited £22 billion 'black hole' in public finances, leading Chancellor of the Exchequer, Rachel Reeves, earlier in the year to say “difficult decisions” need to be taken.

Speaking yesterday, Reeves explained she would be raising taxes by £40 billion in order to support public services. But, how will they affect consumers’ pockets?

Below, we summarise some of the key points and their potential impact on your finances.

1. Employers' National Insurance contributions raised to 15%

Following widespread speculation over recent weeks, Reeves finally confirmed employers' National Insurance contributions (NIC) will rise from 13.8% to 15% from April next year. Furthermore, the threshold at which employers start to pay National Insurance is set to reduce from £9,100 to £5,000 per employee per year.

The measure has already been met with contention, as some believe it goes against the Prime Minister’s pledge to “protect the payslips of working people” due to the potential impact on business owners.

Alongside increasing the National Living Wage by 6.7% to £12.21 per hour, there is also concern employers may recoup these additional expenses by limiting contributions to their employees’ workplace pensions.

“For most workers, the retirement nest egg they accrue as employees, which is topped up by employer contributions, is likely to form the bulk of their income in retirement,” explained Myron Jobson, Senior Personal Finance Analyst at investment platform, interactive investor.

“As such, a decision by an employer to forgo stepping up contributions above the legal requirement to offset heightened cost and tax burdens could have a profound impact on an employee’s retirement outcome,” Jobson concluded.

2. Income Tax brackets to rise in line with inflation from 2028

Meanwhile, in contrast to expectations, Reeves revealed she won’t extend the freeze to Income Tax bands beyond 2028, even though it could raise “billions of pounds”. To do so, she said, would “hurt working people” and “take more money out of their payslips”.

Although the Government vowed not to increase rates of Income Tax in its manifesto, an extension to the current freeze would have resulted in more people paying tax at a higher rate due to the effect of fiscal drag.

Already, over three million retirees are on course to be pulled into a higher tax bracket by 2027/28, according to Jon Greer, Head of Retirement Policy at Quilter. Earlier this week, he urged those already withdrawing from their pension to only take as much as needed each tax-year “as the less you withdraw, the less income tax you will pay."

“Similarly, it is important to remember how much pension income you will have, including your state pension, as it is also taxable,” Greer added.

However, it’s not just pensioners affected by the current freeze. Savers dragged into a higher tax bracket have seen their Personal Savings Allowance (PSA) slashed and subsequently had to pay tax on some or all of the interest they earn.

While basic-rate taxpayers can receive up to £1,000 in interest from savings each tax-year before being taxed, this threshold is halved for higher-rate taxpayers and non-existent for additional-rate taxpayers.

This means a basic-rate taxpayer would only be able to save up to £20,000 in the market-leading easy access account (paying 5.00% AER) before being taxed on interest accrued. As for higher-rate taxpayers, this threshold is an even smaller £10,000.

Those concerned about breaching their PSA could instead consider utilising their annual tax-free ISA allowance which is set to remain at £20,000 until 5 April 2030.

3. Capital Gains Tax hiked in line with residential property sales

Similarly, investors may wish to explore Stocks and Shares ISAs after Reeves raised Capital Gains Tax (CGT) from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers with immediate effect. These are the same rates that currently apply to all residential property sales.

Any returns earned via a Stocks and Shares ISA are automatically exempt from both CGT and Income Tax, but it’s important to remember gains aren’t guaranteed and your capital is at risk when investing.

4. No extension to temporary Stamp Duty relief

While the Government demonstrated a commitment to fixing the housing crisis by offering a £500 million top-up to the Affordable Homes Programme, those looking to get on the property ladder will likely be disappointed to learn Stamp Duty Land Tax (SDLT) thresholds are still set to be lowered.

“This reaffirms a window of opportunity for buyers,” said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk. The nil-rate tax threshold for buyers will reduce from £250,000 to £125,000, while the First-Time Buyer’s nil-rate tax threshold will drop from £425,000 to £300,000 from March next year.

Oliver Dack, Spokesperson for Mortgage Advice Bureau, explained an extension to the temporary tax-relief was “always unlikely given the reported shortfall in public finances”.

“Prospective buyers struggling to save a deposit for a first home, and the associated fees, could explore other resources to help get a foot on the property ladder, such as shared ownership schemes. Those with concerns would also be wise to seek advice from a broker,” Dack added.

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