Rachel Reeves and tax, the £22bn deficit
In her recent announcement to parliament, the Chancellor, Rachel Reeves, confirmed the existence of a £22bn deficit in the UK’s finances, she outlined a number of reductions in public expenditure budgets and hinted that taxes would need to rise to cover any shortfall.
However, she did re-confirm that the basic, higher and additional rates of income tax, National Insurance rates and VAT would not be increased. In this post we have set out some of the measures announced by the Chancellor which you might find of interest.
Labour and Winter Fuel Payments
Winter Fuel Payments from now on will be restricted to those receiving pension credits or other means-tested benefits..
Rachel Reeves and tax – Private school fees
As expected, from 1 January 2025, tuition and boarding fees will be subject to VAT at 20%.
It has also been announced that fees invoiced or paid on or after 29 July 2024 that relate to the school terms after 1 January 2025 will be subject to the standard rate of VAT at the beginning of that term.
School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.
Labour and other tax increases
It is doubtful that the government will be able to plug the spending deficit by merely trimming departmental budgets, and the Chancellor has hinted that the budget announcements to be made on 30 October 2024 will include tax increases.
We know which taxes will not be increased, see above, but that leaves plenty of scope for other taxes to be increased, including CGT, IHT, taxation of dividends, pensions tax relief and various duties.
Would you like to consider your planning options?
It is rare for Chancellors to back-date tax increases to a date before the increases are announced. In which case, there is an opportunity to consider actions that can be undertaken before 30 October 2024, to save tax for 2024-25.
If you would like to talk to a tax advisor to ensure that your tax affairs are optimised and tax efficient please contact or call us on 020 7870 9050, and we can take a look at your options and set out a tax planning strategy which helps you achieve your goals.
