OBR economic forecasts

The OBR has published a report saying the last Government did not disclose all the spending pressures it faced at the Spring Budget. If the OBR had known about these, its assessments would have been ‘materially different’.

Growth
o    2024: 1.1% (0.8% in the Spring Budget)
o    2025: 2.0% (1.9%)
o    2026: 1.8% (2.0%)
o    2027: 1.5% (1.8%)
o    2028: 1.5% (1.7%)
o    2029: 1.6% (no forecast)

CPI inflation
o    2024: 2.5% (2.2%)
o    2025: 2.6% (1.5%)
o    2026: 2.3% (1.6%)
o    2027: 2.1% (1.9%)
o    2028: 2.1% (2.0%)
o    2029: 2.0% (no forecast)

Public sector net borrowing 
o    2024/2025: 4.5% (3.1%)
o    2025/2026: 3.6% (2.7%)
o    2026/2027: 2.9% (2.3%)
o    2027/2028: 2.3% (1.6%)
o    2028/2029: 2.2% (1.2%)
o    2029/2030: 2.1% (no forecast)

Unemployment 
o    2024: 4.3% (4.4%)
o    2025: 4.1% (4.4%)
o    2026: 4.0% (4.2%)
o    2027: 4.1% (4.2%)
o    2028: 4.1% (4.1%)
o    2029: 4.1% (no forecast)

Tax and Duties

The Budget raises taxes by £40 billion overall.

Income tax and National Insurance (NI)

• Income tax personal allowance and NI thresholds to be uprated in line with inflation from April 2028.
• Employer NI contribution rate to increase from 13.8% to 15% from 6 April 2025.
• Secondary threshold to be reduced from £9096 a year to £5000 a year from 6 April 2025 to 5 April 2028 and then to increase in line with CPI. Employers start paying National Insurance when employees’ earnings exceed the secondary threshold.

 Capital Gains Tax (CGT)

• Non-residential CGT lower rate to be increased from 10% to 18% and higher rate from 20% to 24% from 30 October 2024.
• Residential CGT rates to remain unchanged at 18% and 24%.
• CGT rate payable under Business Asset Disposal Relief (BADR) to increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026.

Inheritance Tax (IHT)

• IHT thresholds to remain unchanged until 2030. 
• Inherited pensions to be brought into scope of IHT from April 2027. 
• Business relief and agricultural relief to be reformed from April 2026. The first £1 million of combined business and agricultural assets will continue to get 100% relief. Assets in excess of £1 million will get 50% relief and be taxed at an effective rate of 20%.
• Business relief on AIM shares will be reduced from 100% to 50% and be taxed at an effective rate of 20%.

VAT

 VAT to be introduced on private school fees from 1 January 2025.

ISAs

• ISA, Lifetime ISA and Junior ISA annual subscription limits to remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs until 5 April 2030.
• British ISA proposed in the Spring Budget will not go ahead.
• Domicile
• ‘Non-dom’ rules to be abolished and a residence-based regime to be introduced from 6 April 2025.
• Business Rates
• The Government is to create a fairer business rates system over this Parliament and intends to introduce permanently lower business rates for retail, hospitality and leisure properties from 2026/2027.

Duties

• Fuel duty to remain unchanged including the ‘temporary’ 5p cut.

Work and Benefits

• The State Pension and Pension Credit to be increased by 4.1% in 2025/2026.
• Working age benefits to be increased by 1.7% in 2025/2026.
• From April 2025, National Living Wage for people age 21 or over increased from £11.44 an hour to £12.21 an hour and National Minimum Wage for people age 18 to 20 increased from £8.60 an hour to £10.00 an hour.

Housing

• Stamp duty land tax surcharge for second homes to increase from 3% to 5% from 31 October 2024.
• £500 million to be added to the Affordable Homes Programme to increase social and affordable housebuilding with the intention of building 1.5 million homes over this Parliament.

Public Spending

• £22.6 billion increase to the ‘day-to-day’ budget of the NHS. 
• Core schools budget to increase by an additional £2.3 billion in 2025.
• Funding secured to extend HS2 to London Euston, upgrade the Transpennine route between York and Manchester and launch East West Rail services between Oxford, Milton Keynes, and Cambridge.
• Additional £500 million to be provided in 2024/2025 local roads maintenance funding.