Guernsey 2025 Budget and other tax updates

The 2025 budget for Guernsey was deliberated during the budget debate from 5 to 8 November 2024. While significant changes affecting companies were mentioned, specifically the introduction of GST and Pillar Two, no specific details on the application of these rules have been released to date. Several proposals were debated which could impact individuals.

We've set out some of the key updates below:

• The States approved the introduction of GST starting in 2027. Other measures including social security reforms will be considered alongside this. Further updates will be provided as more detail becomes available.
• The island’s Pillar Two regulations are expected to be implemented for accounting periods starting on or after 1 January 2025, covering both the Income Inclusion Rule and Qualifying Domestic Minimum Top-Up Tax. However, the availability date for the legislation is still uncertain.
• The initial budget proposals released on 9 October 2024, included a plan to raise the personal tax rate from 20% to 22% for a temporary two-year period. This proposal was rejected during the debate, and the personal tax rate will remain unchanged.
• The personal allowance will increase from £13,900 in 2024 to £14,600 in 2025, and the charge of child allowance will rise from £8,850 in 2024 to £9,490 in 2025.
• The planned phase-out of tax relief on mortgage interest for principal primary residences, which was to be completed by 2027, has been paused. A maximum of £3,500 per individual will remain deductible in 2025.
• A new rent-a-room relief is introduced, allowing individuals to claim an exemption of up to £10,000 of income per room per annum for a maximum of two rooms, subject to certain conditions. Further details will be provided later.
• Social security contribution rates will increase: the employer rate from 6.9% to 7% and the employee rate from 7.2% to 7.4% for 2025.
• Directors with substantial control of a limited liability company will now be treated as employees, with social security contributions deducted by the employer. Directors can choose to continue to be treated as self-employed for five years if they opt-in before 31 December 2024.
• As per the 2024 budget, the basis of assessment for Investment Companies will align with their accounting year, not the calendar year, for accounting years ending in 2024 and onwards.
• The 2024 tax return will require entities to disclose any shareholder loan repayments as a tax anti-avoidance measure to identify distributions to shareholders treated as loans instead of dividends. This disclosure is expected to be included only on the Certificate 1 tax return.

Guernsey Tax Return deadline

As a reminder, the GRS have initiated steps to reinstate the original annual filing deadline of 30 November as follows:

There will be two tax filing deadlines in 2025, with the deadline reverting to 30 November annually thereafter. This change is likely to impact many entities, as they will need to produce financial statements for tax returns within a shorter timeframe.

How PwC can assist

We are available to discuss the potential impact of these changes on you and your business. Please reach out to your usual contacts for any assistance.