Changes in tax rules to affect Guernsey residents with UK interests

The point at which the top rate of tax on UK-derived income has fallen by £24,860

• Inheritance & other tax thresholds are frozen at current value despite inflationary environment
• UK government announces a reduction in capital gains tax exempt allowance.

Mark Savage, Tax Director at BDO in Guernsey provides insight on today’s Autumn statement:

“The UK Chancellor confirmed that the UK is currently in a recession and delivered a Statement which promised to promote growth, bring inflation under control, and reduce the cost of borrowing through a combination of spending cuts and tax rises.

“The tax rises are to a large extent, funded by imposing a windfall tax on oil and gas operators and extending the levy to effectively bring in an additional tax on all electricity generators. The Chancellor said that these taxes combined will raise  £14bn in 2023 alone.

“Changes which may be of interest to Guernsey residents who receive UK source income, include the Chancellor announcing a lowering of the point at which the highest earners start paying the 45% top rate of tax from £150,000 to £125,140. However, those on more modest incomes will potentially be negatively affected by an extension to the current freeze on the personal allowance to April 2028 and a freeze on other tax thresholds.

“Individuals who hold UK assets, such as property, or otherwise remain subject to UK Inheritance Tax will note that the current tax-free threshold also remains frozen at £325,000. The effect of inflation means that these frozen allowances may lead to an increased number of Guernsey residents facing UK tax liabilities.

“Guernsey individuals who own UK property in their own name should also be aware that the annual tax-exempt allowance for capital gains, or the profit made after the sale of certain assets, will be reduced from £12,300 to £6,000 from next year, and down to £3,000 from April 2024. This reduction in the allowance does not affect UK properties which are held through Guernsey companies.

“On the other hand, there was good news for those entitled to a UK State Pension in that the Chancellor confirmed that he would retain the so called “triple-lock”, meaning that the pension will rise 10%, in line with UK inflation.

“We’d advise any Guernsey residents with UK assets or interests to check their current situation and see whether they will be affected by today’s announcement.”