Yesterday, Rachel Reeves (the Chancellor of the Exchequer) delivered her anticipated speech regarding the state of the public finances following the tenure of the last administration and given the Labour party’s plans.
The size of the “hole” in the public finances was around the size that had been reported (c£20bn), and was obviously going to be reason for tax changes to be made.
Whilst much of these will be announced at Reeves’ first Budget on 30 October 2024 (the date she announced yesterday), we did have some announcements yesterday.
Budget – 30 October 2024
I wrote recently, post General Election, about my predictions for tax changes to be made by the new Labour government – this can be found here.
Those concerned by sizeable capital gains tax changes and inheritance tax changes should be considering implementing planning before this date.
Those clients relying on the very beneficial inheritance tax Business Property Relief (aka Business Relief – namely on shares in unquoted trading companies or unincorporated business) should be considering their positions (as we expect the relief to be significantly curtailed or abolished).
Furnished holiday let regime abolition
It was announced in Jeremy Hunt’s last Budget in March that the beneficial Furnished Holiday Let (FHL) regime was to be abolished from 6 April 2025. There was, however, almost no detail released at the time of the Budget or subsequently, such that we were left to await what Labour’s plans would be (resulting in a very unwelcome period of uncertainty).
It was confirmed yesterday, that the abolition of the regime is going ahead and will be effective from 6 April 2025 – see here for the announcement.
A welcome measure was that any capital allowances previously claimed on expenditure will continue to be deductible. Consequently, there appears to still be an incentive for expenditure incurred before 6 April 2025 to qualify. We’d strongly suggest all FHL owners consider whether capital allowances claims have been maxmised previously, as after 6 April 2025, the benefit will be lost. We can assist with the identification of any such claims.
I previously wrote an article for Business Cornwall, discussing the FHL abolition that can be found here.
Those considering selling or gifting currently qualifying FHL properties, will need to consider timing (we’d suggest exchange of contracts on sales, and gifts made, before the 30 October 2024 Budget Day).
VAT on private school fees
Rachel Reeves announced that standard-rated VAT would be applied to private school fees from 1 January 2025, as expected given it was a strong pledge by the Labour party during the election campaign.
Families impacted should consider whether income tax planning, using gifts from grandparents (potentially as part of the grandparents’’ inheritance tax/succession planning), could mitigate the overall tax cost.
Please do not hesitate to contact us, if you want to discuss any of the above and seek advice.
Written by Steve Maggs, Tax Partner