Autumn Budget 2024 analysis: no tricks and a few treats
In his latest blog, Dr Martin Turner, BIA’s Associate Director of Policy, Public Affairs & Investor Relations, explores the Chancellor’s Autumn Budget 2024, which prioritises life sciences as a key growth driver within the UK economy. Martin provides an insightful breakdown of the measures, from R&D tax relief to funding boosts in manufacturing and biotech. Read on to discover the budget highlights and what they mean for life sciences in the UK.
The Chancellor’s highly anticipated Autumn Budget has put life sciences at the heart of the government’s growth mission, and delivered reassurance and stability to the sector, as promised.
It arrived amid rife media speculation, with significant attention focused on potential tax changes and their impact on businesses and entrepreneurship. After sustained and strategic advocacy, BIA has successfully secured R&D tax relief and new funding for medicines manufacturing, among other important commitments in the Budget.
Pensions reform to increase investment in the sector – another core area for BIA and our members – received only a brief mention from the Chancellor but we expect updates on that in the coming weeks.
Here are the key announcements for life sciences in the Labour government’s first budget.
Manufacturing
One of BIA’s main asks to the new government was to commit to and launch the £520 million Life Sciences Innovative Manufacturing Fund, which was announced by the previous government to provide capital grants for manufacturing facility projects but delayed following the election.
The Chancellor announced in her speech that life sciences was a core growth sector under the government’s new industrial strategy and that the full £520 million would be funded, with £70 million available to companies in 2025-26. The rest of the funding is expected to be available in 2026-2030. You can apply on the gov.uk website.
R&D funding
Fears that public R&D investment would be cut – particularly the budget of UKRI – to find cash for the UK’s contribution to the Horizon Europe programme appear not to have materialised. In fact, the Chancellor said she would protect “record levels of R&D funding”, with £20.4 billion allocated in 2025-26.
The Department for Science, Innovation and Technology (DSIT) received an 8% budget increase, which covers Horizon Europe and Treasury has specifically ring-fenced core research funding with £6.1 billion. The Chancellor said this included funding for biotechnology and medical science through the research councils. This doesn’t include Innovate UK, meaning its budget will be decided by ministers but the overall envelope doesn’t give us cause for concern. We will however be pressing officials and ministers on this.
The health department will receive a large capital budget uplift of £3.1 billion, which allows them to protect health R&D budgets with a real terms increase in funding for the National Institute for Health and Care Research (NIHR) to support the NHS and wider health and care system in driving a “revolution in research, life sciences, med tech and data.” This will strengthen the UK’s clinical trial network, supporting better patient outcomes, and bolster the life sciences investment environment.
British Business Bank
Over £1 billion across 2024-25 and 2025-26 has been made available for the British Business Bank to enhance access to finance for smaller businesses. A press release from the Bank says this includes expansion for the Life Sciences Investment Programme and Future Fund: Breakthrough, both of which BIA called for ahead of the Budget to bolster the financing ecosystem for life sciences in the short term while pensions investment begins to be unlocked. The exact amount allocated to these programmes’ budgets hasn’t been disclosed, however.
Business tax, including R&D tax relief
A Business Tax Roadmap has been published “to give businesses confidence to invest”. Crucially for BIA members, it contained a number of reassurances on R&D tax relief and other areas of importance.
- R&D tax relief
The Chancellor had already said at the Investment Summit on 14 October that she would maintain the generosity of the rates for the two R&D tax relief schemes, which BIA had campaigned for. She repeated this welcome commitment in her Budget speech. The Roadmap highlights that The RDEC rate of 20% represents the joint highest uncapped headline rate of R&D tax relief in the G7 for large companies. However, we would like this to be true for small R&D-intensive companies too.
HM Treasury acknowledged genuine companies’ frustrations with HMRC inspectors (an issue BIA has raised repeatedly with them) and said it will be “enhancing the administration of R&D reliefs” by establishing the R&D expert advisory panel (announced by the previous government), continuing to improve signposting and guidance on R&D reliefs, and launching an R&D disclosure facility by the end of 2024. This will allow companies that have made mistakes in their claims to correct them. More tax compliance officers will also be hired.
The government has also committed to discussing widening the use of advance clearances in R&D reliefs with stakeholders, with the intention to consult on options in spring 2025. The aim of this is to reduce error and fraud, improve the customer experience, and provide certainty to businesses.
The BIA’s call for a review of R&D tax relief and its support for life sciences also receives a reference: “The government is committed to periodically evaluating the R&D reliefs to ensure they are as effective as possible and underpinned by a credible, up-to-date evidence base.”
- Corporation Tax
Labour’s manifesto commitment to cap the headline rate of Corporation Tax at 25% for this Parliament was also restated. The government will monitor international developments with a view to ensuring that the UK’s regime remains competitive.
- Capital Allowances
Another manifesto commitment to maintain the permanent full expensing introduced under the last government was also kept for this Parliament. This includes other core features of the UK’s capital allowances regime including the £1 million Annual Investment Allowance, writing down allowances, and the Structures and Buildings Allowance.
The government will further explore how to provide greater clarity on what qualifies for different capital allowances, including an extension of full expensing to assets that are bought for leasing or hiring. There will be simplification of capital allowances legislation, and the tax treatment of predevelopment costs.
- Patent Box
The government recognises that the Patent Box has created a competitive tax environment for companies to develop and exploit patents and other similar intellectual property in the UK, and is not planning to make changes to the regime.
Capital gains and investment incentives
The Budget increases the lower rate of Capital Gains Tax (CGT) from 10% to 18% and the higher rate from 20% to 24%, which will impact people and some employees selling company shares. We can’t see any mention of employee share option schemes in the Budget, so assume these remain unchanged.
Business Asset Disposal Relief (previously known as Entrepreneurs Relief) and Inheritance Tax Relief on AIM shares were both rumoured in the press to be up for the chop. In fact, both survived but will be made less generous in the coming years.
Enterprise Investment Incentive (EIS) and Venture Capital Trusts (VCT) were maintained until 2035, as already announced, with no changes to their structure or rate of relief.
Carried Interest
Labour committed in their manifesto to reform the tax treatment of carried interest in the private equity and venture capital industries, the latter of which is an important part of the financing ecosystem for UK life sciences.
Carried interest is treated as a capital gain in the tax system. From April 2025 the higher rate of CGT on carried interest will now increase from 28 to 32%. From April 2026, carried interest will then be classified as trading profits under the income tax framework at a discounted rate, resulting in an effective marginal tax rate of 34.1% for additional ratepayers (outside Scotland), who receive the vast majority of carried interest income. There will also be further consultation.
The British Venture Capital Association has given a measured welcome to the approach, saying that the government has recognised the economic contribution of their industry.
NHS and medicines
The government announced that the budget for the health department is set to increase by £22.6 billion from 2023-24 to 2025-26, amounting to a 4% growth rate for the NHS in real terms. This money will be used to begin addressing the £37 billion shortfall identified by the Darzi report. It will be used to fund new surgical hubs and diagnostic equipment, as well as new technologies and digitisation for the sake of productivity and patient access (BIA’s Emma Lawrence discussed what the Darzi review means for techbio on our blog recently).
The government will also strengthen the UK’s pandemic preparedness and health protection with £460 million of investment to address the risk posed by future health emergencies and implement the lessons learnt from the pandemic by replenishing personal protection equipment (PPE), vaccine and medicines stockpiles, and investing in critical health protection infrastructure, such as high-containment laboratories.
However, there was no mention of the MHRA’s budget.
Skills
As promised in the manifesto, the government will reform the Apprenticeship Levy into a more flexible Growth and Skills Levy, including investing £40 million, which will help to deliver new foundation and shorter apprenticeships in key sectors (this will probably include life sciences, in line with the industrial strategy).
The reformed levy will be developed in partnership with employers, providers, and learners. Skills England will take the time to consult with a wide range of partners to ensure that levy-funded training meets the needs of employers, providers, and learners, and secures good value for money.
The Budget also provides an additional £300 million for further education in England, while increasing the core schools budget by £2.3 billion, which increases per pupil funding in real terms.
Life science clusters
The Budget seeks to unlock growth in the Oxford, Milton Keynes and Cambridge corridor through £10 million of funding to enable the Cambridge Growth Company to develop an ambitious plan for the housing, transport, water, and wider infrastructure Cambridge needs to realise its full potential, and by taking the next steps to deliver East West Rail. The government says this will support life sciences companies and unlock private investment, cementing Cambridge’s status as a globally renowned centre of excellence and its important role within the industrial strategy.
The Budget document also notes that funding was released earlier this month for Investment Zones announced under the last government, including one on life sciences in West Yorkshire, supporting major clusters in the Industrial Strategy’s growth‑driving sectors.
BIA’s reaction
Responding to the Budget, BIA’s CEO Steve Bates said:
Today’s Budget rightly puts the life science sector at the heart of UK economic growth. In a tough fiscal environment Chancellor Rachel Reeves recommitted to R&D tax credits at current rates for this parliament. It’s great to see the £520 million Life Sciences Innovative Manufacturing Fund had its website open for business within an hour of the statement.
Equally importantly is the commitment to protect core research funding for biotechnology and medical science. With the creation of the National Wealth Fund and Emma Reynold’s Pensions Review now underway, we will work in partnership with government to crowd further investment into this key growth sector in the coming months.
Read the full transcript of the Chancellor’s speech and the main Budget and supporting documents.
