Welcome to our roundup of the latest business news for our clients. Please contact us if you would like to discuss how these updates may impact your business. We are here to support you!
Chancellor’s Speech Paving the Way to a Potentially Difficult Autumn Budget
The Chancellor of the Exchequer, Rachel Reeves, addressed the House of Commons last week to detail the results of a Treasury spending audit. She revealed £22 billion of unfunded pledges inherited from the previous government, including commitments to the Rwanda scheme, the Advanced British Standard, and the New Hospital Programme. The Chancellor announced initial savings of £5.5 billion this year, with a further £8.1 billion to come next year, including:
Cutting winter fuel payments to only those receiving other State support.
Scrapping the Rwanda migration partnership and reviewing the Illegal Migration Act.
Cancelling the Investment Opportunity Fund and other small projects.
Reviewing the New Hospital Programme and deferring the Advanced British Standard and certain road and railway schemes.
The Chancellor confirmed acceptance of the Independent Pay Review Body's recommendation for a 5.5% pay uplift for public sector workers. Future Spending Reviews will cover a three-year period with a one-year overlap. A single major fiscal event will continue annually, likely an autumn Budget. The 30 October Budget will include:
Ending VAT tax breaks for private schools from 1 January 2025.
Replacing the non-domicile regime with a new residence-based system.
Extending the Energy Profits Levy and increasing the rate.
Closing the carried-interest loophole for private equity fund managers.
Further details will be provided in the October Budget. For more information, see Chancellor's Statement.
Bank of England Reduces Base Rate to 5%
On August 1, the Bank of England reduced its base rate from 5.25% to 5%. This decision was close, with a five to four majority. The Monetary Policy Report explains that while higher rates have helped reduce inflation to 2%, a temporary rise to 2.75% is expected later this year. The Bank is cautious about further cuts, prioritizing inflation control. Borrowers will benefit from lower rates, but savers may not. For details, see Bank of England Report.
Abolishment of Furnished Holiday Lettings Tax Regime Confirmed
HM Revenue and Customs (HMRC) have published draft legislation for the abolition of the furnished holiday lettings (FHL) tax regime, effective from 6 April 2025 for income and capital gains tax, and 1 April 2025 for corporation tax. Changes include:
Restricting loan interest to the basic rate for Income Tax.
Removing capital allowance rules for new expenditure.
Ending capital gains tax reliefs for FHLs.
Excluding FHL income from relevant UK earnings for pension relief calculations.
Review how these changes will affect you and contact us if you need assistance. For more details, see HMRC Draft Legislation.
VAT on Amazon Fees from 1 August 2024
From 1 August 2024, Amazon's selling fees charged to UK vendors will be subject to 20% VAT due to a change in the legal entity handling these fees. VAT-registered vendors can reclaim the VAT, while non-VAT-registered vendors will see a 20% increase in fees. This change is likely to be passed on to consumers. For more information, see Amazon VAT Change.
Changes to National Minimum Wage Recommendation Criteria
The government has updated the remit for the Low Pay Commission (LPC), now requiring it to consider the cost of living when recommending minimum wage rates. The LPC will also aim to narrow the gap between minimum wage rates for 18-20 year olds and the National Living Wage, with a long-term goal of a single adult rate. Recommendations will continue to be made each October for implementation in April. For more details, see LPC Remit Update.
Changes to Non-Domiciled Tax Status to Go Ahead
The new government will continue with plans to end non-domiciled tax status, replacing it with a residence-based regime from 6 April 2025. This change will:
Tax all foreign income and gains for UK residents.
Provide a 100% relief for new arrivals for their first four years.
End transitional 50% relief previously announced.
Inheritance tax will also shift to a residence-based system from 6 April 2025. For more details, see Non-Domiciled Tax Changes.
VAT on Private School Fees: What That Means for You
From 1 January 2025, private school fees will be subject to 20% VAT, and private schools will no longer be eligible for charitable rates relief. This change will likely increase fees, though schools may be able to absorb some of the cost. The VAT change does not apply to nurseries, before or after school childcare, or public sector further education colleges. For more information, see VAT on Private School Fees.
IPO Issues Warning About Misleading Invoices
The Intellectual Property Office (IPO) has issued a warning about fraudulent invoices for trademarks, designs, or patent services. These invoices often come from unrecognized organizations and may request inflated payments. Businesses should report such invoices to the IPO and the police if they believe they have been defrauded. For more details, see IPO Warning.
Cyber Security and Resilience Bill to Help the UK’s Critical Systems Stay Online
The government plans to introduce a Cyber Security and Resilience Bill to address vulnerabilities in critical national infrastructure, such as water, power, and healthcare services. The Bill aims to strengthen defenses against cyber threats. For more information, see NCSC Blog.
New Mandatory Housing Targets for Councils
The government has announced new mandatory housing targets for councils in England to deliver 1.5 million more homes. Reforms include facilitating brownfield development and reviewing green belt land. These changes aim to boost opportunities for construction-related businesses. For more details, see Housing Targets.
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