What does the budget mean for you?

Deputy Lyndon Trott said this budget would fix the island's short-term financial issues

Policy and Resources (P&R) President Lyndon Trott started the year predicting a budget surplus, he has ended it with an ambitious plan to tackle a growing deficit.

2025's Guernsey States budget is packed full of proposals, but what does it mean for you?

What do the changes to income tax mean?

Many of the sums in the 2025 budget rely on the money raised by an extra 2p in the pound on income tax.

That proposal raises, according to P&R, about £34m.

To mitigate the impact on the lowest earners, income tax allowances - how much you can earn before being taxed - are set to go up by £1,100 to £15,000, which will reduce what the States brings in by £6.2m per year.

Treasury officials estimate this will mean the average family will pay £22 more in tax each week, about £1,114 per year.

Under P&R's proposals a couple with no children and a household income of £40,000, will only be slightly worse off, while those earning less than that will actually be better off according to analysis by treasury officials.

The threshold at which the allowances are withdrawn could also go up to £82,500.

Limited changes to other taxes

To the delight of hospitality businesses, after a campaign for the move, the tax on the price of alcohol has been frozen.

While other levys like the tax on fuel and owning a home are going up by the rate the cost of living is increasing, which is 3.2%.

Smokers see the biggest increases with the tax on tobacco products going up by an inflation busting 13.2%, increasing the tax on a pack of 20 cigarettes from £7.57 to £8.57.

No new taxes

Deputy Lyndon Trott said he wanted this to be a simple budget without the "stealth taxes" which he said "wind people up".

To that end despite P&R having been tasked with coming to the States with plans for transport taxes like paid parking, the committee has not done that.

It has also avoided bringing plans for taxes on unoccupied buildings and derelict greenhouses.

Guernsey's States had directed P&R to look at raising more money through paid parking

Housebuyer support

With politicians recognising the island is in the midst of a housing crisis, efforts to make it easier for first-time buyers to get on the market have also been included.

The changes, according to the treasury, will mean a reduction in the document duty on an average house purchase of more than £1,000.

Part of the plans also involve taxing those who buy big homes more, with a proposal to create a new threshold for document duty so anyone buying a property for more than £5m would have to pay a fee equal to 7% of its value.

P&R Vice-President Heidi Soulsby's plan to give tax breaks to landlords to encourage spare rooms to be rented has also been included.

If approved landlords renting out up to two rooms can get £10,000 of rent before paying any tax on it.

There are rules for the scheme though, so the room must be in the taxpayer’s principal private residence and the room must be furnished and cannot be a self-contained unit in that property.

Changes to mortgage interest relief

If approved the budget for 2025 would see the programme where mortgage interest relief is being phased out stopped for rented residential properties.

P&R hopes this will stimulate the rental market, which it said has been struggling recently.

However, mortgage interest relief will continue to be phased out for people's principal private residences.

The withdrawal was paused in 2023 and 2024 to provide support to islanders during a period of high inflation and rising interest rates.

P&R proposes the relief limit drop from £3,500 to £2,000 in 2025 as the interest rate position has now stabilised and the increase in property prices has ceased.

This move is expected to impact about 6,000 individuals and generate about £1m in revenue.

The new Victor Hugo Centre is set to be based at the Information Centre

What will the extra money be spent on?

This is a budget for growth according to Trott and his colleagues.

The big winner is the planned Victor Hugo Centre at the Information Centre, previously the States Offices, in St Peter Port.

P&R has committed to giving £1 for every £2 raised by the charity behind the project, up to a maximum of £2.5m. So if £5m is raised by the charity, the States will provide £2.5m.

Some of the £34m raised by the planned increase to income tax, would be spent on policies to grow the economy, including £541,000 on air and sea links and £389,000 for Locate Guernsey to bring high net worth individuals to the island.

There is also a focus on how the States can save money in the future, with £750,000 earmarked for the development of a sustainable healthcare model.

Naturally if the States rejected P&R's plans then the committee said it would have to come back with scaled back spending plans in early 2025.

Charities to get tax breaks

The Association of Guernsey Charities has been a long-time campaigner for tax breaks for charitable donations.

P&R has given the group part of what it has been asking for by recommending that donations of between £500 and £10,000 are eligible for a 25% tax rebate.

What savings are planned?

Previously a number of deputies refused to introduce any kind of new taxes like GST, or tax increases last year, until the States had shown it had made a concerted effort to make savings.

This budget does not include a central savings target.

But it does include proposals to adopt some of the recommendations from P&R's savings sub-committee.

Those include expanding online services like e-billing for the States, ensuring up-front payment for Health and Social Care services, changing the shape of government and reviewing family allowance and the grants given to Education, Sport and Culture.