Christie & Co comments on the Autumn Budget 2024

Reeves began her statement addressing that this is the first Budget to be delivered by a woman, and she is “deeply proud” to be the first female Chancellor of the Exchequer.  

Here are some of the key takeaways that will impact our business sectors.  

ECONOMY   

• This Budget raises taxes by £40 billion and will focus on rebuilding public services. 
• £70bn investments to be made through the National Wealth Fund (NWF) 
• OBR confirmed borrowing is at £127 billion this year. 
• GDP growth will be 1.1% in 2024. 
• Increased funding significantly for local governments in 2025. Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year. She says it will give mayors "meaningful control of the funding for their local areas". 
• The Government will renew the tobacco duty escalator at RPI +2%, increase duty by 10% on hand-rolled tobacco this year, introduce a flat-rate duty on all vaping liquid from 2026, and a one-off increase in tobacco duty to maintain the incentive for smokers to give up smoking. 

BUSINESS  

• The current 75% discount to business rates for retail, leisure and hospitality businesses - due to expire in April 2025 - will be replaced by a discount of 40% - up to a maximum discount of £110k. 
• From April 2025, National Insurance contributions by employers will rise from 13.8% to 15%. In addition, the threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000. 
• Capital Gains Tax (CGT) will increase with immediate effect. The lower rate of Capital Gains Tax will rise from 10% to 18%, and the higher rate from 20% to 24%. The rates on residential property will remain at 18% and 24%. 
• The Government will increase Capital Gains Tax rates on carried interest to 32% from April 2025 and, from April 2026, deliver further reforms. 
• Increased employment allowance to help smaller businesses. The employment allowance will increase from £5,000 to £10,500, which will mean 865,000 employers won’t pay any National Insurance at all next year. Over one million will pay the same or less as they did previously. 
• Duty on draft alcohol will be cut by 1.5% "which means a penny off the pints at the pubs," the Alcohol duty rates on non-draught products will increase in line with RPI from February 2025 
• Fuel duty will be frozen next year and will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps in 2025. 
• The Government will bring inherited pensions into inheritance tax from April 2027, and there will be reform to Agricultural Property Relief and Business Property Relief. From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%. 
• Crack down on organised gangs that target retailers – stop shoplifting in its tracks.  

 TAX, WAGES & BENEFITS 

• The National Living Wage for people aged 21 or older will rise by 6.7% from £11.44 an hour to £12.21 from next April.  
• National Minimum Wage will also rise for people aged between 18 and 20-years old from £8.60 to £10. Apprentices will get the biggest pay bump, with hourly pay increasing from £6.40 to £7.55. 
• The OBR say CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029. 
• No increase in National Insurance, VAT and income tax for working people. 
• Spending on the state pension is projected to rise 4.1% in 2025-26 – a £470 increase for over 12 million pensioners in the UK. 
• Extended the inheritance tax threshold freeze for a further two years to 2030. 
• The Government will increase the stamp duty land surcharge for second homes, by 2% to 5% from 31 October 2024. 
• Increase the windfall tax on oil and gas profits to 38%, which will now expire in March 2030. The Government will remove the 29% investment allowance, to ensure that oil and gas industry can protect jobs and support the UK's energy security. 
• There will 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. 
• Carers' allowance will increase from £81.90 per week to the equivalent of 16 hours at the National Living Wage per week. A carer can now earn over £10,000 a year whilst receiving the allowance. This will allow them to "keep more of their money".  

EDUCATION 

• Introduction of VAT on private school fees from January 2025. 
• The Government will soon introduce legislation to remove their business rates relief from April 2025. 
• Investment into breakfast clubs will be tripled. There will also be a £2.3bn increase to the core school’s budget to ensure hiring of teachers into key subjects. There will be an additional £300m for further education 
• £1bn uplift (6% increase) in funding for SEN education.  
• The Government promised an additional £6.7bn to the Department for Education next year, - a 19% real-terms increase on this year. This includes over £1.4bn to rebuild 500 schools "in the greatest need". The Government will provide £2.1bn more to improve school maintenance, an increase of £300m in 2024. 

SUSTAINABILITY 

• The Government will maintain existing incentives for Electric Vehicles (EVs) in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025. The measure is forecast to raise about £400m by the end of the forecast period.  

NHS 

• £22.6bn increase in the health budget for NHS “day to day” spending, over the next two years. 
• There will also be a £3.1bn increase in capital investment for 2025-26 compared to 2023-24, up to £13.6bn overall. Within this, there will be £1.5bn in capital funding for new surgical hubs and diagnostic scanners 
• £1bn of health capital investment in 2025. 
• Aim to decrease average wait times to 18 weeks. 

Read what our experts have to say in response...   

Commenting on the pharmacy market, Tony Evans, Head of Pharmacy, Christie & Co, said: “The combined effects of the increases to the National Living Wage and the 1.2% increase to employers' National Insurance contributions, to take effect from April 2025, will pile more pressure on cash-strapped pharmacy contractors. With the continued uncertainty surrounding the sector’s ongoing funding negotiations, it is now even more imperative that a meaningful funding settlement is agreed upon to enable pharmacies to recover from the five years of real-term cuts whilst offsetting the increased cost burdens announced today.” 

Commenting on the day nurseries sector, David Eaves, Director – Childcare & Education, Christie & Co, said: “The Budget began with the promise of economic growth as Labour’s mission. The expected rises in Capital Gains Tax (CGT), National Insurance, and National Living Wage will hit childcare and education businesses throughout the UK. Against the backdrop of the expansion of funded hours to include children under two years, the announcement that minimum wage for 18–20-year-olds will increase by 16%, Living Wage for those 21 and over will increase by 6.7%, and apprentice wages by 18% will immediately offset a significant proportion of the benefit afforded by the funded rate being paid by local authorities for those youngest children. Given the number of young and apprentice-age staff employed in day nurseries, these wage rate increases will potentially have a significant impact if these cost increases cannot be passed on through fee increases. As with any increase to the National Living Wage, it is not only those lowest-paid members of staff that have to be considered but also the knock-on effect this has on wage increases for Nursery Practitioners, Room Leaders, Deputies and Managers to maintain a pay differential reflective of their role and responsibilities. In what is becoming a common theme, settings only offering care and education for preschool-age children will likely be hardest hit as they are unable to benefit from the increased funding provided to younger children. 

“Also announced today were further changes to employers' costs through the increase of Employers' National Insurance contributions by 1.2% to 15%, while also lowering the threshold at which employers pay NI from £9,100 to £5,000. This, coupled with the announced Living Wage changes, represents potentially significant increases in staffing costs. Some relief was offered to the smallest of settings however, through the increase in the employers’ allowance to £10,500. 

“While we saw a surge in transactional activity pre-budget, with operators looking to exit before any announcements that may affect the value of their business, many childcare providers that had been considering delaying exit plans while realising the benefit of the full funding roll out may now look to bring forward their plans due to increasing employment costs and tax reforms eradicating much of the benefit they would have been expecting to see over the next 12 to 18 months. Given the headline rate of CGT is to be increased from 20% to 24% with immediate effect, the next milestone in terms of changes will occur in April 2025 when the Business Asset Disposal Relief (BADR) rate increases from 10% to 14% for the first £1m of taxable gain, and providers that had been contemplating an exit will clearly have an eye toward this date in order to minimise their tax burden as far as possible.” 

Commenting on the SEN sector, Courteney Donaldson, Managing Director – Childcare & Education, Christie & Co, said: “The Budget began with the promise of economic growth as Labour’s mission. The expected rises in Capital Gains Tax (CGT), National Insurance, and National Living Wage will hit childcare and education businesses throughout the UK. While a 6% increase - of £1bn - in funding for SEN education will be a welcome easing of pressure, it does not address the deficits of more than £4bn that have built up in local authorities. More detail is needed around this funding commitment in order to fully understand its impact on the SEN space.” 

Commenting on the independent school sector, Courteney Donaldson, Managing Director – Childcare & Education, Christie & Co, said: “The Budget began with the promise of economic growth as Labour’s mission. The expected rises in Capital Gains Tax (CGT), National Insurance, and National Living Wage will hit childcare and education businesses throughout the UK.   

“The full impact of VAT introduction on enrolment levels will not be fully understood for some time, to also introduce Business Rates from April 2025 will further squeeze private schools. Many childcare providers that had considered delaying exit plans, while realising the benefit of the full funding rollout, may look to bring forward their plans due to increasing employment costs and tax reforms eradicating much of the benefit they would have been expecting to see over the next 12 to 18 months. 

“The Government also promised an additional £6.7bn to the Department for Education next year - a 19% real-terms increase on this year. This includes over £1.4bn to rebuild 500 schools ‘in the greatest need’. The Government will provide £2.1bn more to improve school maintenance, an increase of £300m in 2024.” 

Commenting on the social care sector, Hannah Haines, Head of Healthcare Consultancy, Christie & Co, said: “It was disappointing that the social care sector has been overlooked in today’s Budget. It is, however, positive to see the Government delivering on an increase in NHS funding (before reform) which is a necessary start, with more details on future funding expected in the NHS 10-year plan in Spring. This is a good step forward for the wider healthcare sector and keeps us optimistic that Labour may deliver on its promise to “build an NHS fit for the future”.

“The ongoing issue of local governance financing has been acknowledged with an increase in funding of £1.3bn for Councils, £600k of which is earmarked for social care (adult and children’s). Though this looks to be a plaster on the problem as “Council’s un-ringfenced reserves fell by £1.7bn in 2022/23 and £1.1bn in 2023/24.” (Local Government Association). We know that funding is disproportionately awarded to children’s and younger person’s care needs, with fractions likely to reach the elderly care sector.

“The increase in the National Living Wage and employer National Insurance contributions creates further stress on employers where staffing costs are already at circa 60%, especially for those where many places are local authority funded. Given the fiscal pressures local authorities are under, we expect fee increases to be less generous in 2025/26 (8-9% increase this year), which will mostly hit smaller operators and those reliant on local authority fees as opposed to self-funded models. For self-funders, operators may look to pass on the NI increase through fee rate increases, alongside the wider inflationary cost pressures.

“Whilst the increase in CGT is not as great as we had anticipated, the overall tax burden is now at a historic high. What we have now, though, is certainty, which is key for our markets to operate effectively. Business owners can now plan their exit strategies in the knowledge of their tax burden, and we expect to see some much-needed stability in the market.”

Commenting on the hotels sector, Carine Bonnejean, Managing Director - Hotels, said: "Across the Hotel sector, there was certainly some apprehension about what the Budget would bring and the impact on transactions. Overall hotel transactional activity is significantly up year to date with almost £5bn worth of hotel deals versus £1.3bn over the same period last year. But, over the past six weeks, we have seen some more urgency to close deals before the Budget was announced and prospective buyers tried to buy some time to see what the Budget would bring, with regards to taxes in particular. 

"The announced rise in Capital Gains Tax is undoubtedly not welcome news for business owners, but transactions will still happen even though this rise will have to ultimately be reflected in pricing. In operational real estate like hotels, payroll cost is a big factor of profitability, so the rise in employer National Insurance contributions and National Minimum Wage will impact margins and ultimately bottom-line conversion. The announced changes in business rates relief for leisure and hospitality businesses will also have an impact on conversion levels.

"Hopefully, the increases in National Minimum Wage will increase confidence and spending power for consumers, particularly from a leisure demand perspective, which is positive in light of top-line performance generally plateauing."

Commenting on the retail and leisure sectors, Steve Rodell, Managing Director - Retail & Leisure, said: “While, in today's Budget, the Government committed to economic growth, it also committed to hikes in taxes for businesses around the country, including Capital Gains Tax and a rise in employers' National Insurance contributions by a lower £5,000 threshold. There will also be an added burden to businesses from an increase in the National Minimum wage that will somehow need to be paid for.  On the plus side, small employers will benefit from an increase in the Employment Allowance from £5,000 to £10,500.

The increase in the National Living Wage is likely, and NI will likely be passed to consumers in a higher process, but measures to increase household income will help retail and leisure consumer spending.  

The current 75% discount to business rates for retail and leisure businesses is due to expire in April of next year but will remain at a reduced 40% discount with a cap of £110K.  It will be interesting to see how this may affect growth plans. It is good news that small business rate relief stays in place and that the multiplier for retail hospitality and leisure will be set at a lower rate from the 2026 revaluation.

Fuel duty is frozen for another year and the Government will maintain the current 5p discount to help households. However, it has continued to emphasise the importance of investment in green infrastructure and technologies needed to achieve net zero, as we’ve seen with its introduction of the Vehicle Excise Duty. Car drivers who have been put off electric vehicles recently haven’t seen any incentives to turn their heads in this budget.

In the retail and leisure sectors, many deals are moving forward regardless, but at the higher end of the deal value range, some stakeholders have been adopting a ‘wait and see’ approach but we should see these move forward now."

Commenting on the pubs and restaurants sectors, Stephen Owens, Managing Director - Pubs & Restaurants, said: "The current discounted business rates for hospitality businesses are due to expire in April 2025, so the announcement of a 40% replacement discount is welcome although this will still see rates bills increase significantly for many. The announcement that there will be a lower multiplier from 2026/27 is positive. The Government’s increase of National Living Wage and National Minimum wage doesn’t come as a surprise. While this will be a positive in terms of disposable income and spending within the pubs and restaurant sectors, it will inevitably put more pressure on businesses.”