The Chancellor, Rachel Reeves, has announced that the first budget of the new parliament will be held on 30 October 2024. We consider the Chancellor's options to repair a £22 billion 'hole' in the public finances. A range of measures that are in line with Labour's manifesto were also announced this week. We take a closer look at what is to come.
Just announced (in line with manifesto promises):
VAT
From 1 January 2025, all education services and vocational training supplied by a private school or a 'connected person', for a fee, will be Subject to VAT at the standard rate of 20%. This also applies to boarding services closely related to this type of supply.
The government also plans to remove the eligibility of private schools in England to business rates charitable rates relief. It is expected this measure will apply from April 2025.
Furnished Holiday Let
The Furnished Holiday Let (FHL) regime will be abolished in April 2025. Anti-forestalling rules apply from 6 March 2024. From April 2025, properties that previously qualified for FHL status will now form part of the taxpayer’s UK or overseas property business as relevant. Such properties will then be subject to the same rules as non-FHL property businesses.
Non-domiciled taxpayers: reform
- The Non-domiciles tax regime is confirmed as being abolished from 6 April 2025.
- The new government is adopting the rules for the replacement residence-based regime and will consult and discuss modifications to key measures including trusts with key stakeholders.
- Whilst it has decided to use several of the proposals proposed by the last government its has closed down certain perceived loopholes in the original proposals.
See Non-domiciles new regime
Carried interest
The taxation of the Carried Interests of investment managers will be reformed to remove capital gains treatment where the economic characteristics are those of income. As part of that process, a Call for Evidence has been issued. In particular, the government is seeking detailed engagement with expert stakeholders.
Multinationals
For multinationals, there are new anti-arbitrage rules under Piller 2, to prevent the exploitation of the tax and accounting rules. A new policy paper has been [published, 'Multinational top-up tax and domestic top-up tax — transitional country by country reporting safe harbour anti-arbitrage rule'.
The draft legislation aims to prevent taxpayers from engaging in avoidance arrangements to benefit from the transitional Country-by-Country Reporting (CbCR) safe harbour. The UK's adoption of the Multi-national Top-Up Tax (Income Inclusion Rule) (MTT) and the Domestic Minimum Tax (DMT) were introduced in the Finance (No2) Act 2023. These measures took effect for accounting periods beginning on or after 31 December 2023.
The Energy Profits levy will increase from 35% to 38%.
HMRC: closing the Tax Gap: a new recruitment campaign aims to bring in 5,000 new staff.
What else to expect?
No one knows but there is speculation that the chancellor will make reforms to:
- Small business taxation
- IR35
- Inheritance Tax (IHT)
- IHT Agricultural Property relief
- Capital Gains Tax (CGT) rates
Useful guides on this topic
Abolition of the FHL regime: Briefing
HMRC have published draft legislation and related notes detailing how the abolition of the Furnished Holiday Letting (FHL) rules in April 2025 will operate. We consider the practical impact of the loss of the FHL rules and provide some essential planning points.
Non-domiciled Individuals: new proposals
The new government has confirmed its policy intention of removing the concept of domicile status from the tax system and will implement a new residence-based regime, in so doing it will not be applying all the changes announced by the last government last Spring and will close some loopholes including the 50% reduction transitional rule. It says that it wishes to create an internationally competitive regime and is focused on attracting the best talent and investment to the UK.
