Guernsey Budget update 2025

Whilst we spend less per head on public services than any other comparable jurisdiction, there is still insufficient income to meet the budget requests made by the various public service departments. It has therefore come to the time for tax increases to be looked at. As a short-term measure P&R have announced a 2% increase to the individual income tax rate for two years with a permanent solution to be decided on in 2026. Personal allowances will be increased to £15,000 to protect those on lower incomes from the tax rate increase.

This increase is expected to bring in £34m of additional revenue per annum but this is still insufficient to meet the demands on public service budgets and a 3% increase would be required to generate sufficient income.

It’s not all bad news in order to avoid changing multiple taxes and to give everyone a break from above inflation increases, there will be no real term increases on TRP or fuel duty and alcohol duty will be frozen.

In addition, the document duty thresholds are to be increased meaning a reduction of more than £1,000 in document duty on the average house purchase.

Whilst the mortgage interest relief for principal private residences is continuing to be phased out, the withdrawal of relief on interest for domestic let property is being paused to help alleviate some of the pressure on the rental market meaning that 50% of interest payments will continue to be deductible in 2025 and subsequent years.

To further assist the rental market, rent-a-room tax relief is to be introduced for personal taxpayers. This relief will mean an exemption of up to £10,000 per room for a maximum of two rooms, subject to certain conditions being met.  

The Alderney Tax Cap will be removed and is to be replaced an equivalent to the Guernsey Open Market Tax Cap. This will be set at £60,000 for qualifying new residents, in addition those currently claiming the Alderney Tax Cap will be eligible to claim this new Tax Cap going forwards.

The company higher income tax rate will remain at 20% and so for the first time there are potential tax savings of holding assets, such as rental properties, in a company. There will of course be additional costs of running the company, but these could still be outweighed by a potential tax saving compared to holding in a personal capacity.

If you would like to discuss the budget proposals or any other tax matters please do contact us.