Five major Budget 2024 tax changes announced and how they will affect you

Chancellor Rachel Reeves said the new Labour Government had to take “difficult decisions” as she announced today’s Budget would raise taxes by £40bn.

She said the “scale and seriousness” of the situation that Labour had inherited from the Conservatives could not be “underestimated” and she was required to take action to restore “stability to our public finances and rebuilding our public services”.

However, in her address to the House of Commons, Reeves promised that working people would ‘not see higher taxes in their payslips'. This meant no increase in income tax, VAT and employee's national insurance.

READ MORE: Sixteen key highlights from Rachel Reeves' Budget 2024 including wage rise and new vape tax

But the Chancellor - who spoke of her pride at being the first ever woman to hold the post - did announce some major changes to taxes, including:

National insurance contributions for employers

Reeves announced that national insurance contributions for employers would increase by 1.2% to 15% from April 2025 - which she said would raise £25bn a year for the government.

Reeves told the Commons: “I say to working people: I will not increase your national insurance, your VAT, or your income tax. Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.”

She added: “But any responsible Chancellor would need to take difficult decisions today. To raise the revenues required to fund our public services. And to restore economic stability. So in today’s Budget, I am announcing an increase in employers’ national insurance contributions.

“We will increase the rate of employers’ national insurance by 1.2 percentage points, to 15%, from April 2025. And we will reduce the secondary threshold – the level at which employers start paying national insurance on each employee’s salary – from £9,100 per year to £5,000. This will raise £25 billion per year by the end of the forecast period. I know that this is a difficult choice. I do not take this decision lightly.

“We are asking business to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today. But in the circumstances that I have inherited, it is the right choice to make.”

Capital Gains Tax

Reeves also announced that there would be an increase in capital gains tax (CGT). This tax is charged on profits made from selling assets such as a second home or investments, including shares.

She said the lower rate of Capital Gains Tax - if your overall annual income is below £50,270 - would rise from 10% to 18%. Meanwhile, the higher rate - if your overall annual income is above the £50,270 threshold - would rise from 20% to 24%, she added.

The rates on residential property are set to remain at 18% and 24%.

Inheritance tax

Inheritance Tax is a tax on the estate - property, money and possessions - of someone who has died.

In Wednesday’s budget, the Chancellor confirmed changes to inheritance tax - including bringing pension pots within the tax from April 2027 and reforms to agricultural and business property reliefs, raising a total of £2 billion a year.

She said: “Only 6% of estates will pay inheritance tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today. First, the previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030.

“That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.”

On inheritance taxes applied to farms, the Chancellor said: “We will reform agricultural property relief and business property relief. From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with 50% relief, at an effective rate of 20%.”

Stamp Duty

Stamp Duty Land Tax (SDLT) is what you have to pay if you buy a property or land over a certain price in England and Northern Ireland. In today’s budget, the Chancellor announced that the stamp duty land tax surcharge for second homes will increase by two percentage points to 5% - and it will come into effect from Thursday.

Tax thresholds

The Chancellor also confirmed she would not extend a freeze on income tax and national insurance thresholds - in a surprise Budget move for millions of workers.

The current freeze on tax thresholds - the point at which you start to pay tax - is due to last until April 2028 and it had been widely reported that the Government could extend this by a further two years, until April 2030 - dragging more people into paying tax as wages rise.

However, she confirmed in her Budget today that there would be no extension of the freeze in income tax and national insurance thresholds beyond the decisions of the previous government. From 2028-29, personal tax thresholds will be uprated in line with inflation, with Reeves saying that it would “hurt working people” to keep thresholds frozen.