The new Labour government has set the date for their Autumn Budget and this will be held on 30 October.
On 29 July the Chancellor of the Exchequer, Rachel Reeves, delivered her statement to Parliament and we have listed some of the key tax points that may be of interest to you:
Abolition of Furnished Holiday Let Tax Regime
The abolition of the FHL rules will proceed from 6 April 2025, thus removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties. The government has published a policy paper and draft legislation.
What this will mean for individuals:
- Loan interest will be restricted in line with ordinary residential property treatment (basic rate tax relief)
- Capital allowances removed and expenses to now fall under replacement of domestic items relief (any capital allowances pool can continue to be written down)
- Losses will now be pooled and not ringfenced against FHL
- Withdrawal from the potential capital gains tax reliefs such as business asset disposal relief or rollover relief
- The income will no longer be considered qualifying income towards relevant earnings for pension contributions
Individuals have an opportunity here to maximise the available reliefs before the new rules apply. Whether there is any action to take will depend on your personal goals.
You may for example want to pass your FHL to the next generation now with the current availability of gift hold-over relief. This would keep the property within the family and mitigate the immediate tax liabilities.
VAT and Private School Fees
It was confirmed that VAT at 20% will be charged on private school fees and boarding. The government has stated that these changes will not impact pupils with acute special educational needs, where those needs can only be met in private schools.
This will apply to fees paid from 29 July 2024, in relation to the term starting in January 2025 and then future terms.
The government is also consulting on its plan to remove the business rates relief from which private schools currently benefit as charities. It is expected that this measure will apply from April 2025.
Changes to the Taxation of Non-UK Domiciled Individuals
The government is removing preferential tax treatment based on domicile status for all new foreign income and gains (FIG) that arise from 6 April 2025.
To replace the remittance basis of tax, the government will introduce an internationally competitive residence-based regime, providing 100% relief on FIG for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.
Inheritance tax (IHT) is currently a domicile based system. The government intends to replace this with a new residence based system from 6 April 2025, affecting the scope of property brought into UK IHT for individuals and trusts.
The Taxation of Carried Interest
Carried interest is a form of performance-related reward received by fund managers, primarily with the private equity industry. The government has launched a call for evidence on the tax treatment of carried interest. This does not provide any specific policy detail but instead seeks answers to the following three questions:
- How can the tax treatment of carried interest most appropriately reflect its economic characteristics?
- What are the different structures and market practices with respect to carried interest?
- Are there lessons that can be learned from approaches taken in other countries?
A further announcement on this measure is expected in the October Budget.
Pillar Two: Anti-Arbitrage Rule
The government has published draft legislation to implement the transitional Country-by-Country Reporting (CbCR) safe harbour anti-arbitrage rule, ensuring that UK legislation remains consistent with the OECD G20 Inclusive Framework’s December 2023 Administrative Guidance.
The draft legislation prevents attempts by multinational enterprises from avoiding Pillar Two top-up tax by exploiting a temporary simplification in the rules.
Energy Profits Levy
It was announced that this levy will increase from 35% to 38% from 1 November 2024. It will also be extended to 31 March 2030 (it had been due to expire on 31 March 2029).
To discuss any of these tax matters, or the accountancy and tax support you need, please call our friendly team on 01249 712074 or email theteam@cvag.co.uk