On 30th October 2024, Rachel Reeves delivered her first Budget as Chancellor, accompanied by a full statement from the OBR.
But what does that mean?
The Budget is a yearly announcement by the government of their plans for spending over the next financial year. From announcements regarding pay, public services, pensions, and tax, this particular Budget was widely discussed and has brought many changes that could impact households across the country.
The Autumn Budget is set to impact all of our daily lives and wallets. That’s why staying informed and understanding these changes is essential.
In this article, we’ll examine what the Budget 2024 means for you and how recent changes may impact your finances.
1) Increase in Minimum Wage
According to the Autumn Budget 2024, minimum wages paid by employers will rise across the UK in April 2025. This means:
For employees aged 21 and over, it will rise from £11.44 an hour to £12.21.
If you’re 18, 19, or 20 years old, the minimum wage will go up from £8.60 an hour to £10.
For those who are 16 or 17 years old, the minimum wage will increase from £6.40 an hour to £7.55.
If you’re working full-time this increase in minimum wage will add roughly £1,400 per year. By giving you more to work with, this change could help you manage essential living expenses better amidst rising living costs.
The ‘Help to Save’ scheme has also been extended by two years until April 2027 and widened so more people can take part. This scheme offers low-income workers a savings account where they can save up to £50 monthly for four years. It also ensures they receive a 50% government boost at the end of year two and year four. The scheme will be open to all working Universal Credit claimants who earn at least £1 a month.
2) Universal Credit Cap for Debt Repayment Plans
It was announced in the Budget that the UK government is creating a new Fair Repayment Rate. This will cap deductions made through Universal Credit at 15% (previously 25%) of the standard allowance.
By being able to retain more Universal Credit income each month, many households are expected to be better off by approximately £420 a year.
As a result of being able to keep more of your monthly payments, you could receive up to an extra £35 a month. If you’re struggling with debt or covering essential costs, these additional funds could prove to be a lifesaver, giving you more room to manage your finances more effectively.
3) Higher Costs for Commuting by Bus
If you rely on the bus for travel or commuting, this may be a more negative change.
Beginning in 2025, the single bus fare cap will rise from £2 to £3 on many routes in England, which will significantly affect your daily commuting costs. However, the single fares for cities like London and Greater Manchester will remain at £1.75 and £2 respectively.
While this may initially appear to be a minor change, it can add up quickly, especially if you travel often. Whilst other bus offers will still be available, it’s a good idea to factor these new costs into your own monthly budget.
4) Impact on Job Prospects
The increase in minimum wage is certainly something to look forward to. However, the added costs to employers, including the larger contribution to National Insurance (NI) may affect wider hiring and job prospects, particularly if you’re looking for a new job.
NI paid by employees is not expected to change, however, hiring and the likelihood of pay rises may be hit to cover the additional financial burden faced by employers. Some businesses may end up passing these rising costs on to consumers by raising prices, which may also lead to everyday items becoming more expensive.
If you’re currently looking for a new job or awaiting a pay review, make sure you are aware of these changes in the budget when negotiating your salary.
5) Urgent Considerations for Home Buyers
According to the Budget 2024, the threshold for stamp duty for buyers who have already owned a home will drop from £250,000 to £125,000 from April 2025 in England and Northern Ireland. If you do own a home and are considering moving, the minimum threshold could make you liable for up to £6,250 in additional tax.
First-time buyers will also get relief only on homes up to £300,000, instead of £425,000. Whilst it may seem like a distant goal for many, if you are aspiring to own your own home, trying to do so before the changes in April could save you thousands in additional taxes.
However, to help house buyers the government has also committed £500 million to the Affordable Homes Programme. This is a decision that could significantly increase the options available in the affordable housing market. It’s especially helpful if you’re looking to get on the housing ladder or for a more budget-friendly living spaces.
6) A Review of Your Pension Inheritance Plans
Whilst probably not at the top of your priorities currently, with the reveal of the 2024 UK Budget, it’s a smart time to consider reviewing your pension inheritance plans.
Inheritance tax (IHT) is a tax that is paid on someone’s assets after they pass if they leave behind an amount above a specific threshold. Many types of assets are also free from IHT, which means they can be passed onto your loved ones without any additional payment.
Typically, IHT often only affects high earners. However, with the rules changing, reviewing your pension inheritance plan has become essential, with many more people expected to be pulled into the inheritance tax bands.
Currently, you can leave your unspent pension fund to anyone without paying IHT. However, from April 2027, this will no longer be the case. You’ll still be able to leave behind money to a spouse or civil partner without them having to pay IHT and there’s no limit on how much you can leave them, however, if you leave it to someone other than a spouse, they may need to pay IHT from 2027 onwards.
Even if inheritance tax may not apply to you right now, certain changes in rules and circumstances may still affect how your pension is passed on. By reviewing your beneficiary options and pension arrangements, you can minimise future costs for your loved ones.
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From affecting income to commuting costs, the Budget is expected to impact many aspects of our daily lives. While some of these adjustments may make the possibility of owning a home more distant, minimum pay rises will hopefully provide a sigh of relief after the last few years of inflation. Keeping informed and taking a proactive approach will help you maintain financial independence along the way.
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