In her announcement to parliament, when the Chancellor, Rachel Reeves, confirmed the existence of a £22bn deficit in the UK’s finances, she outlined several reductions in public expenditure budgets. She hinted that taxes would need to rise to cover any shortfall.
However, she confirmed that the basic, higher, and additional income tax rates, National Insurance rates, and VAT would not be increased.
In this alert, we have listed some of the measures announced.
Winter Fuel Payments
Winter Fuel Payments from now on will be restricted to those receiving pension credits or other means-tested benefits. https://www.gov.uk/winter-fuel-payment/how-much-youll-get
Private school fees
As expected, from 1st 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 29th July 2024 that relate to the school terms after 1st January 2025 will be subject to the standard rate of VAT at the beginning of that term.
School fees paid before 29th 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.
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 30th 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.
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 this case, there is an opportunity to consider actions that can be undertaken before 30th October 2024, to save tax for 2024-25.
For all your accounting issues please call us today on 01473 744700
Please see another Accounting Gem blog: https://www.aag-accountants.co.uk/tax-relief-for-pension-contributions/
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