Budget 2024: Key points that affect your money explained - from tax to wages and smoking

As any good magician will tell you, magic is the art of distraction.

In order to fool the audience you need to shift their attention elsewhere so they miss the bit where they trick you. The government’s budget is in many ways an example of this kind of sleight of hand. For a decade or more now, successive Chancellors have found themselves trapped by promises not to raise taxes or cut in to public services.

So they’ve found creative ways to find money that don’t appear to be taxes, even though you might end up paying more. Or they target other demographics or sectors for extra charges which end up costing you more by default.

The problem with all of this – aside from the honesty factor – is the fact that the budget has become increasingly complicated. Complicated to such a degree that even economists and experts like me have to spend hours puzzling over the details to see what it all means.

In this article I’m going to try and translate some of the things in the budget in to plain English – and take a look at what it might mean for your finances in the coming months. But let’s be honest. Wouldn’t life be so much easier if governments went back to being honest and gave it to us straight? We might not like higher taxes but we would at least know exactly where we stand.

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Key points that affect the pound in your pocket

If you’re trying to make sense of the budget now we’ve had a little time to absorb it, you might be thinking that the focus on making employers rather than employees pay more tax means less additional costs for you. But the devil is in the detail…

The rule of cause and effect – in this case, where the impact of one price hike ends up costing you more elsewhere – is very much in effect with this budget. In short, it’s not the announcements in the budget that could cost you more – it’s their consequences.

Employers pay more – which could affect your wages

The Chancellor wants to raise £40billion – and over half of that sum (£25billion) will come from employers. A big chunk of this is from employee’s national insurance contributions, which will increase from 13.8% to 15% (from April 2025). In addition, employers will now have to start paying these contributions once their employees earn over £5,000 rather than the current threshold of £9,100.

In simple terms, your boss will now have to pay National Insurance Contributions (NICs) once you earn over £5,000 – at a higher rate. This is different to your employee NICs, which aren’t changing. There are tons of different categories for NICS.

The obvious danger here is employers will simply stop recruiting. That means less jobs, a heavier workload for existing employees and a cut in production. On a wider scale, that could affect how quickly the economy grows (or shrinks) - which directly affects us all.

A number of readers have contacted me because they have worked for a business for less than two years. At present your employer can ‘let you go’ if you’ve worked for them for less than two years, without needing to give you a ‘fair reason’. This is often known as the ‘last in, first out’ principle. And yes, this could happen.

While the government has announced the new Employment Rights Bill which will introduce a statutory nine month maximum probation period and will give you other rights from day one, this still has to be debated and it will be a long time before it becomes law.

Minimum wage to go up

In great news for people struggling to get by on low wages, the minimum wage – the lowest amount your employer can legally pay you – is going to increase. What you get depends on your age. The new rules will kick in from April 2025:

• If you are over 21, you’ll get £11.44 an hour, up from £12.21.
• If you are aged between 18 and 20, you’ll get a tenner an hour, up from £8.60.
• If you are 16 or 17, you’ll get £7.55, up from £6.40

If you’re on an apprenticeship and you’re under 19 (or are in the first year of a new apprenticeship and are over 19) you’ll get an increase in the minimum wage of £7:55.

The impact on smaller businesses

We tend to think of businesses as corporate organisations of natty start-ups. However, the majority of smaller businesses are retailers or service providers. From hair salons to florists, these businesses are the ones that are often hit the hardest by rising costs. An established business can pay someone to deal with all of the new rules. Whereas small businesses often have to struggle through complex and confusing rules on their own.

There are an estimated ) in the UK. This is defined by having 0 to 49 employees. The vast majority of these – 5.23 million – are These are businesses with less than 10 employees and a turnover of less than £632,000 (£1,800,000 for some other measures).

A smaller business with NIC contributions of less than £100,000 can apply for the . Again, this is complicated but it can reduce your tax burden. Oh and just to complicate things, there are other discounts that can be applied for too, depending you’re your business sector. But finding what schemes apply to your small business is far too complicated.

But the rise in the minimum wage is a big concern for many of the smaller businesses I’ve spoken to since the budget was announced. Making sure people can earn enough to get by is a positive thing. But it may mean some businesses simply can’t afford to take on new staff – or keep the ones they currently have.

Smaller businesses are exceptionally important to the economy. In fact, it makes financial sense to help them stay in business as it’s more expensive if they fail and the state has to pick up the pieces. So I’m hoping that we’ll see a range of support measures for SMEs soon.

Pensions to cigarettes – other costs and benefits

Inheritance tax and pensions

One thing I find really is younger people worrying about inheritance tax. While this tax certainly winds up the upper and middle classes, it’s actually not something that affects huge numbers of people. According to HMRC, less than 4% of estates paid inheritance tax in 2020/21 when figures were last available. It’s projected that this will increase to around 7% by 2032/33 as the estates of the wealthiest grow.

The big worry that I hear is . But there’s no inheritance tax on the property if it’s passed on to a spouse. If the home is left to the kids or grandkids, you don’t pay anything on the first £500,000 of the estate, which is more than the current minimum threshold of £325,000 for estates generally. I appreciate that some homes may well be worth more than that now, but a crafty bit of inheritance tax planning can go a long way towards reducing the bill to your estate.

A bigger concern was the announcement that inherited pensions are now to be included in the estate when calculating inheritance tax. If you are worried about this you can speak to a pensions adviser to get some advice, or chat to the free Money Helper service.

Lifestyle and day-to-day living

The ban on smoking in beer gardens has purportedly been shelved, but the government wants us to stop smoking – I know I need to. A packet of fags will increase 2% above inflation and rolling tobacco will go up 10%. Will that be enough to get us stubborn smokers to stub it out? We’re nearly at £20 for a packet now. Don’t reach for the vapes just yet though as a new tax of £2.20 per 10ml of fluid will also be introduced to tackle the epidemic in kinds huffing e-cigs.

(Slight) good cheer for beer drinkers though as 1.7% in tax gets deducted from draft booze, but non draft drinks will increase in line with inflation. And it’ll be pricier to get on the bus too, with a journey now capped at £3, up from £2. Not in Manchester or London though, where the mayors have resisted the increase. However, you can still jump in the car for the same price (in tax) as fuel duty is frozen. And on that note. I’m off to the pub! I’m walking. It’s cheaper.

is a leading consumer rights campaigner, TV and radio broadcaster and journalist

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