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Now that a Labour government has settled into Downing Street, we are starting to gain an understanding of what their plans are regarding taxes. Below, we look at some policies that have already been announced. Then, we look ahead to the first budget under new Chancellor Rachel Reeves on 30th October later this year. Finally, we look at the long-awaited abolishment of non-domiciled tax status.
BANK OF ENGLAND FINALLY LOWERS INTEREST RATES
The Bank of England has remained cautious throughout 2024, keeping the base rate at 5.25% in recent months. On 1st August, it was revealed that the Monetary Policy Committee voted 5-4 in favour of lowering the base rate to 5%. Hopefully, this trend continues throughout the rest of the year and the pressure on mortgage-holders and business owners eases further.
FIRST TAX ANNOUNCEMENTS FROM NEW CHANCELLOR
As widely reported before and after Labour’s election win last month, the government has announced a plan to charge VAT on private school fees from January 2025.
The 20% rate will also apply to pre-payment of fees, implemented as an anti-forestalling measure.
Thankfully, the government has announced that there is no wider change in private education for the provision of books, nursery care school meals and holiday clubs, all of which will remain zero-rated for VAT beyond January 2025.
In a slightly unexpected move, business rates relief has also been scrapped for private schools, meaning next year will require significant adjustments within the sector.
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OCTOBER 2024 BUDGET: WHAT CAN WE EXPECT?
Chancellor Reeves has hinted at tax rises looming in the coming months, although so far has remained coy about what shape they will take. She has repeatedly insisted that the government will not “increase taxes on working people”
However, difficult decisions are inevitable. £22bn is the estimated deficit between what the government can afford and what it currently plans to spend, so compromises in the form of cuts and rates hikes seem overwhelmingly likely. It is now a case of waiting until October to see what action the Chancellor will take to ensure financial stability moving forward.
NON-DOM STATUS ABOLISHMENT
The surprise announcement of the July election delayed progress on Jeremy Hunt’s controversial policy to scrap tax reliefs for non-UK domiciled individuals.
After decades of arguing against abolishing the policy, the Conservatives set in motion its demise and now Labour, longstanding opponents of what they believed to be an unfair loophole, are pressing forward with the relevant legislation.
HM Treasury have published a policy paper outlining some of the finer details:
FURNISHED HOLIDAY LETTINGS REGIME DISSOLVED
After 40 years, the government has announced it is pressing ahead with the abolishment of the Furnished Holiday Lettings Regime. This change will take effect from April 2025. An anti-forestalling rule has been introduced to ensure there could be no unfair tax advantages arising from the use of unconditional contracts to acquire capital gains relief under the present FHL regulations.