Budget 2024: Your Complete Guide to Personal Finance Changes and Impact

National Living Wage Increase

The National Living Wage for workers aged 21 and over is set to rise to £12.21 per hour in April 2024.

This substantial increase from the previous rate of £11.44 is a move to ensure that wages keep pace with the cost of living and inflation.

The aim is to help families and individuals better manage their day-to-day expenses and improve their overall standard of living.

New Minimum Wage Rates for Different Age Groups

Younger workers also see changes in their minimum wages, aimed at providing fair compensation across varying age brackets:

• Workers aged 18-20 will have their minimum wage increased from £8.60 to £10.00 per hour.
• For those aged 16-17, the rate will go up from £6.40 to £7.55 per hour.
• Apprentices under 19 or in their first year will see their wages rise from £6.40 to £7.55 per hour.

These adjustments are slightly more modest compared to previous years’ percentage increases, reflecting a slower inflation rate in the current economic scenario.

Potential Impact on Employment Prospects

While the wage increases are beneficial for employees, they also bring about challenges for employers.

The rise in wages means higher operational costs, which could impact employment dynamics:

• Employers may find it harder to maintain their current employment levels, potentially leading to job cuts or reduced hiring.
• To offset the increased costs, businesses might pass on some expenses to customers through higher prices, which could dampen consumer spending.

Nevertheless, despite these potential downsides, ensuring employees receive a living wage can lead to a more motivated and productive workforce, ultimately benefiting businesses and the broader economy.

As we delve further into the budget, we’ll see how changes to transportation and fuel costs might influence your day-to-day life.

Transportation and Fuel Costs

With the forthcoming changes, the cost of transportation in England will see some significant adjustments.

The single bus fare cap will be raised to £3 by 2025, which marks an increase from the previous cap of £2.

This move aims to help bus companies manage rising operational costs, but it will also impact daily commuters who rely on bus travel.

London and Greater Manchester will maintain their lower fares of £1.75 and £2 respectively, due to different funding systems.

On a brighter note for motorists, the fuel duty freeze that has been in effect since 2011 continues.

This enduring policy provides some stability in fuel pricing amidst fluctuating oil markets.

Moreover, the extension of the 5p-per-litre fuel duty cut will bring a bit more relief at the pump.

Fuel is a significant expense for households and businesses alike, so these measures are geared towards keeping transportation costs manageable.

However, while fuel duty remains stable, rising bus fares might push some daily commuters to explore alternative modes of travel, like cycling or carpooling, to reduce overall travel costs.

Next, we will delve into the repercussions of these financial adjustments on a broader economic scale, which may have a domino effect on various aspects of daily life and business operations.

Tax System Updates

Changes to Inheritance Tax

Starting in April 2027, your pension savings will be included in your estate’s value when calculating inheritance tax (IHT).

This means the IHT, currently set at 40% for assets above £325,000, could impact more estates than before.

Approximately 8% of estates are expected to be affected by this inclusion, bringing a noticeable shift for many.

Capital Gains Tax Rate Increases

There will be significant hikes in Capital Gains Tax (CGT) rates, affecting both basic and higher rate taxpayers.

For basic rate taxpayers, the CGT rate will increase from 10% to 18%, while higher rate taxpayers will see their rate rise from 20% to 24%.

This change aligns CGT rates on general assets closer to the existing rates on property gains, impacting anyone selling assets like second homes or investments.

New Rules for Property and Business Asset Inheritance

From April 2026, new rules will alter the previously tax-exempt status of certain inherited properties, such as farms and family businesses.

Estates with more than £1 million in property and business assets will now face some tax obligations.

This update aims to ensure a more equitable tax distribution across different types of inheritances.

These updates to the tax system will reshape financial planning, especially for those with significant assets.

As we shift our focus to the processing of these changes, let’s now look at how consumer costs and lifestyle adjustments will further impact households.

Consumer Costs and Lifestyle Changes

The recent budget introduces several measures that will affect everyday living expenses and lifestyle choices.

Increased Tobacco Duty and New Vaping Liquid Taxation

From October 2026, the tax on tobacco will see a significant hike.

The new rates will increase by 2% above inflation for standard tobacco products and by 10% above inflation for hand-rolling tobacco.

These rises are designed to further deter smoking and offset healthcare costs connected to tobacco use.

Moreover, vaping liquids will now be subject to a flat rate duty of £2.20 per 10ml starting from October 2026 as well.

As vaping has been growing in popularity, this added taxation aims to regulate the market and generate revenue, while potentially influencing public health outcomes.

VAT Addition to Private School Fees

Beginning January 2025, parents of children attending private schools will begin to see a substantial increase in their bills.

The government has introduced a policy to add a 20% VAT to private school fees.

This change may lead to higher overall costs for families investing in private education.

Schools might adjust fees accordingly, and some parents could reconsider their education plans based on these increased expenses.

Stamp Duty Changes Affecting Rental Market

Stamp duty for second homes and buy-to-let properties will undergo changes that could cause a ripple effect in the rental market.

These alterations are set to decrease the number of landlords willing to invest in rental properties, potentially leading to a reduction in the supply of rental homes.

With fewer properties available, rental prices might increase, impacting tenants in existing rentals.

Adjustments in consumer costs are just one aspect of the comprehensive fiscal changes introduced in the budget.

As we move forward, the benefits and pension updates also warrant attention.

Benefits and Pension Updates

Benefits Increase

Starting in April, those receiving benefits will see a 1.7% increase.

This is designed to keep pace with inflation, ensuring that recipients can maintain their purchasing power amidst rising costs.

For example, the standard Universal Credit allowance for a single person under 25 is expected to increase by about £5.30 per month, bringing it to around £317.

Couples over 25 will see their allowance rise by £10.50 a month, totaling roughly £628.

State Pension Rise

State pensions will also receive a boost.

From April, the full, new flat-rate state pension is set to rise by 4.1%, bringing it to approximately £230.30 per week, which amounts to £11,975 annually.

Those on the older, basic state pension plan are not left out, with their weekly rate increasing to £176.45, adding up to £9,175 per year.

This increase helps pensioners tackle the rising cost of living more effectively.

Carers’ Earnings Threshold

Significantly, carers will benefit from a higher earnings threshold before affecting their allowance.

The threshold will rise from £151 to £195 weekly.

This change allows carers to earn more without losing their allowances, providing better financial stability.

The government’s changes aim to alleviate some financial pressures, especially for those reliant on state support systems.

Next, we’ll dive into how these adjustments fit within the broader tax system updates.

Income Tax and Future Planning

With the Budget 2024 announcements, one crucial area to dissect is the changes to the income tax system and how it affects future financial planning.

Let’s dive into the specific updates and what they mean for us all.

No Additional Income Tax Threshold Freeze

Good news! The Budget 2024 has decided against freezing income tax thresholds beyond the current plan.

This means that, for now, there’s no surprise clampdown on your income that could have dragged more of your earnings into higher tax brackets.

Thresholds to Rise with Inflation from 2028

Starting in 2028, income tax thresholds will rise in line with inflation.

This adjustment is intended to prevent “fiscal drag,” where inflation pushes taxpayers into higher brackets, artificially inflating tax burdens.

Such a move helps maintain purchasing power and aligns your tax brackets with real-world cost increases.

By ensuring thresholds keep pace with inflation, your take-home pay retains more of its value over time.

Scotland’s Separate Income Tax Rate System

Scotland operates under its own income tax structure, with different rates and bands compared to the rest of the UK.

These distinctions can directly affect financial planning if you are residing or planning to move between Scotland and other parts of the UK.

It’s crucial to stay informed about these regional variations, as they could impact your net income and tax liabilities significantly.

In summary, while the recent Budget aligns funding mechanisms with economic realities, this approach ensures that inflation adjustments will help maintain balance.

Keeping an eye on source changes and planning accordingly is essential for navigating the evolving tax landscape effectively.

Now, let’s keep moving forward with our exploration of the broader financial impacts of Budget 2024.