Wednesday’s UK Budget was a relatively uneventful one but did include changes that will impact some Guernsey companies and employees, according to experts at BDO Guernsey.
At a breakfast event delivered to local financial services professionals, Mark Savage and Emily Marriott-Trebert unpacked Rachel Reeves’ Budget and explained its significance to a local audience.
“Overall this is an uneventful Budget, especially compared to 2024’s, which introduced a number of headline-grabbing measures including the changes to the non-dom regime,” said Mark.
“Rachel Reeves had to cut spending or raise taxes and she mostly went for the latter, albeit in a way that isn’t going to hurt too much, too soon.
“None of the big announcements will have huge relevance for Guernsey, but there are some technical changes to be aware of that will impact Guernsey companies and employees.”
Local trustees will have taken note of changes to excluded property trusts. Where the settlor is a long-term resident of the UK, these trusts, including Guernsey ones, holding UK assets are, from April 2026, subject to ongoing inheritance tax charges. However, following yesterday’s announcement these will be capped at £5 million per trust every 10 years. This will only benefit higher value trusts.
The much-hyped changes applying inheritance tax to agricultural property announced in 2024 were refined yesterday, as the Chancellor announced that the cap of £1m could be split between spouses, effectively allowing for £2m of agricultural property to be eligible for full relief. However, following this year’s Budget, it will not be possible to plan for the change to the status of agricultural property by “enveloping” the assets in non-UK companies.
Mark highlighted that another change could affect those who work elsewhere: “The UK has adopted the OECD’s definition of ‘permanent establishment’, which means having a taxable base in another territory. This is very relevant to cross-border home working, so if a Guernsey company has an employee working in the UK, that could now be considered permanent establishment in the UK, and vice versa.
“Crucially though, the definition distinguishes between whether the employee’s location is an attempt by the company to establish a base in another jurisdiction, or is simply an employee choice for convenience of lifestyle. The latter will not be subject to increased taxes or requirements.”
Pictured: Emily Marriott-Trebert and Mark Savage
