The current tax benefits for the letting of properties as short-term holiday lets (known as Furnished Holiday Lets – FHL) is to be abolished from April 2025. The changes will take effect on or after 6 April 2025 for Income Tax and for Capital Gains Tax and from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

The changes will remove the tax advantages that current FHL landlords have received over other property businesses in four key areas by:

• applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax;
• removing capital allowances rules for new expenditure and allowing the replacement of domestic items relief;
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets;
• no longer including this income within relevant UK earnings when calculating maximum pension relief available.

After the repeal, properties previously classified as FHLs will be integrated into the individual's UK or overseas property business and will be governed by the same rules as non-FHL property businesses.

An anti-forestalling rule also prevents individuals from gaining a tax advantage by entering into unconditional contracts to claim capital gains relief under the current FHL rules. This provision applies from 6 March 2024, the date the measure was first announced.

The removal of the special tax regime for holiday lets is expected to have a significant impact on many involved in the short-term holiday rental market in the UK.

A salary sacrifice arrangement involves an agreement by an employee to lower their cash salary in exchange for non-cash benefits. Importantly, this reduction must not bring their earnings below the National Minimum Wage (NMW).

If an employee wishes to join or leave a salary sacrifice arrangement, the employer is required to update their contract, thus ensuring clarity on cash and non-cash entitlements.

Additionally, significant lifestyle changes—such as marriage, divorce, a partner's redundancy or pregnancy—may necessitate adjustments to the arrangement, allowing employees to opt in or out.

The following benefits are currently exempt from Income Tax or National Insurance contributions and do not need to be reported to HMRC:

• payments into pension schemes;
• employer provided pensions advice;
• workplace nurseries;
• childcare vouchers and directly contracted employer provided childcare that started on or before 4 October 2018; and
• bicycles and cycling safety equipment (including cycle to work schemes).

In some circumstances when a salary sacrifice is tax-free, for example, swapping salary for an employer contribution to a pension scheme, the reduction in salary will reduce an employers’ NIC charge.

Capital allowances enable businesses to claim tax relief on certain capital expenditures. Different rules apply to various types of capital expenditure, and the amount you can claim depends on the specific capital allowance you use. If an item is eligible for more than one type of capital allowance, you can choose which to apply.

The main capital allowances currently available are:

• Annual Investment Allowance (AIA) – The AIA is available to all businesses (companies, sole-traders and partnerships) regardless of size. The AIA allows businesses to write off 100% of the cost of qualifying Plant & Machinery (P&M), up to the allowed maximum, against taxable profits. You can claim up to £1 million on qualifying purchases.
• Full expensing and 50% First Year Allowances – The full expensing measure currently applies from 1 April 2023 until 31 March 2026 and allows companies to claim 100% capital allowances on qualifying plant and machinery investments. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p. For “special rate” expenditure, which does not qualify for full expensing, a 50% FYA can be claimed instead. 
• Writing down allowances – For P&M expenditure that exceeds the AIA or does not qualify for a FYA. You can claim these allowances if your plant and machinery does not qualify for AIA, or you have already claimed the maximum amount. This relief is based on the cost of the items in the year they are acquired. A standard 18% writing down allowance is available on qualifying assets. There is a lower rate of 6% available for certain long-life assets and integral features.

The Bank of England's recent decision to reduce the base rate to 4.75% brings several potential benefits to various sectors of the UK economy. Let's explore these advantages in detail.

Reduced Borrowing Costs

Lowering the base rate directly influences the interest rates offered by banks and financial institutions. This reduction can lead to decreased borrowing costs for individuals and businesses.

Mortgages: Homeowners with variable-rate mortgages may see a reduction in their monthly payments. For instance, a 0.25% decrease on a £200,000 mortgage could save approximately £28 per month. This reduction can ease financial pressures on households.

Stimulated Economic Growth

Lower interest rates can encourage spending and investment, which are vital components of economic growth.

• Consumer Spending: With reduced borrowing costs, consumers may be more inclined to make significant purchases, such as homes or cars, boosting demand in these markets.
• Business Investment: Affordable financing can lead businesses to invest in new projects, technology, or workforce expansion, contributing to economic development.

Enhanced Business Confidence

Lower borrowing costs can improve business sentiment.

• Investment in Growth: Companies may feel more confident in investing in growth opportunities, leading to innovation and expansion.
• Job Creation: Business expansion can result in job creation, reducing unemployment rates and stimulating economic activity.

Impact on Savings

While lower interest rates can benefit borrowers, they may affect savers.

• Reduced Savings Returns: Interest earned on savings accounts may decrease, potentially discouraging saving.
• Shift to Investments: Savers might seek higher returns through investments in stocks or bonds, influencing financial markets.

Broader Economic Implications

The rate cut can have wider economic effects.

• Stock Market Reaction: Lower rates can lead to higher stock prices as investors seek better returns than those offered by savings accounts.
• Bond Yields: Government and corporate bond yields may decrease, affecting investment strategies.

In summary, the Bank of England's decision to cut the base rate to 4.75% is designed to stimulate economic activity by reducing borrowing costs, encouraging spending and investment, and supporting various sectors of the economy. While there are potential downsides, such as reduced returns for savers, the overall aim is to foster a stable and growing economic environment.

Will there be further rate cuts?

The recent elections in the United States may have an impact on the speed of further rate cuts as the markets anticipate protectionist tariffs and other factors that may dampen economic growth. Business owners and households would be advised to budget for rates between 4% and 5% for some time.

When evaluating the annual running costs of electric vehicles (EVs) compared to diesel cars, several key factors come into play: fuel (or electricity) expenses, maintenance, insurance, taxation, and depreciation. Here's a detailed comparison:

Fuel/Electricity Costs

• Diesel Cars: Assuming an average fuel efficiency of 50 miles per gallon (mpg) and a diesel price of £1.49 per litre, driving 10,000 miles annually would cost approximately £1,361.
• Electric Cars: With an average consumption of 17.5 kilowatt-hours (kWh) per 100 miles, the cost varies based on charging methods:
  • Home Charging: At a standard rate of 29p per kWh, the annual cost is about £508.
  • Public Charging: Using public chargers at an average of 59p per kWh, the cost rises to approximately £1,033.

Therefore, EVs can offer significant savings on energy costs, especially when primarily charged at home.

Maintenance Costs

• Diesel Cars: These vehicles have complex engines with numerous moving parts, leading to higher maintenance needs and costs over time.
• Electric Cars: EVs have fewer moving components, resulting in lower maintenance expenses. Estimates suggest servicing electric cars is about 23% cheaper than servicing diesel or petrol cars over a three-year/60,000-mile period.

Insurance Costs

• Diesel Cars: Insurance premiums are generally based on factors like vehicle value, performance, and repair costs.
• Electric Cars: Insurance for EVs can be higher due to their higher purchase price and specialised repair requirements. Some studies indicate that electric car insurance premiums are 14% higher than their petrol or diesel equivalents.

Taxation

• Diesel Cars: Subject to Vehicle Excise Duty (VED) based on CO₂ emissions, leading to higher annual tax charges.
• Electric Cars: Currently exempt from VED, offering annual savings. However, starting in April 2025, EVs will no longer be exempt from road tax.

Depreciation

• Diesel Cars: Tend to depreciate steadily over time.
• Electric Cars: Initially faced higher depreciation rates, but recent trends show EVs retaining value better, especially as the market grows and technology improves.

Overall Comparison

While EVs often have higher upfront costs, their lower fuel and maintenance expenses can lead to reduced annual running costs compared to diesel cars. However, factors like insurance premiums and future tax changes should be considered. Individual driving habits, charging options, and specific vehicle models will influence the total cost of ownership.