Autumn Budget announces tax rises and higher spending

The Chancellor announced tax increases amounting to just over £40 billion per year by the end of the forecast period (2029/30), alongside additional spending reaching over £70 billion by the same point, according to UK Finance's Household Finance Review for the third quarter of 2024¹. The Budget statement was delivered at the end of October 2024¹.

Most of the revenue raised comes from an increase in employer national insurance contributions (NICs), including a cut to the level at which employers start paying NICs. An offsetting increase to the employment allowance is aimed at minimising the impact on the smallest employers. Changes to the capital gains tax regime, including for "non-doms", and the application of VAT to private school fees account for most of the rest of the revenue raised¹.

The additional spending will provide departments with budgets for this financial year and next, and set the broad spending envelope for the 2025 spending review¹.

The Office for Budget Responsibility expects some pass-through from higher NICs into consumer prices, and the additional demand generated by fiscal loosening, to leave CPI higher, notably next year. The NICs rises also feed into weaker real income growth, particularly in the later years of the forecast, so household spending growth is expected to be weaker than previously forecast¹.

Why it matters for households

The Budget measures take effect against a backdrop in which headline inflation fell back to 1.7 per cent in September 2024, before ticking up to 2.3 per cent in October. UK Finance notes that the increase in the energy price cap from October will push CPI higher by the end of the year, with further upward pressure from the Budget measures¹.

Wage growth moderated over the quarter but remained elevated, with regular pay showing annual growth of 4.8 per cent in the three months to September¹. The Monetary Policy Committee cut interest rates by a quarter point twice, in August and November, and its communications indicated a gradual approach to removing policy restraint, likely ruling out further cuts this year¹.

On mortgages, UK Finance reports that by the end of the third quarter the number of mortgages in arrears had fallen by three per cent, to 106,630 cases¹. It adds that older mortgages, written under less stringent underwriting criteria, remain at heightened risk amid higher interest rates and household bills, and make up the majority of customers in heavy arrears and of mortgage possessions¹.

UK Finance's assessment is that households will not feel materially better off in the near term¹. The Budget's effect on tax rates and thresholds, and on the public finances, is set out in the measures above.

What happens next

The additional spending announced provides departments with budgets for this financial year and next, and sets the broad spending envelope for the 2025 spending review¹. UK Finance says the detail of the Budget will influence the path of growth, inflation, investment and the labour market in the year ahead, and that the potential impact on businesses may take a little time to process¹.