John Fernandez Guernsey political reporter
BBC
Deputy Lindsay de Sausmarez said a £600 increase in personal income tax allowances would help people with the cost of living
Further tax breaks for landlords, new taxes on vaping and higher personal income tax allowances could all be agreed next month as part of Policy and Resources’ (P&R) budget for 2026.
In setting out the budget, P&R stated the States faced a deficit of £48m and that “long-term structural balance must remain the primary focus of this assembly”.
Despite this, only £1.2m in revenue-raising measures have been proposed, including above-inflation increases to taxes on cigarettes, petrol, and property.
P&R President Lindsay de Sausmarez described the 2025 budget as “not exciting”.
A decision on broader tax reform – including whether GST [goods and sales tax] should apply to food, and whether companies should pay more tax on their income – is expected before June next year.
Why is there a deficit?
De Sausmarez blamed a shrinking working population, increased demand on health services and the fact people were living longer locally for the island’s financial challenges.
He said: “To balance the books, we’re proposing some modest increases in some taxes and duties, combined with some savings through reductions in expenditure.”
Last month, the BBC reported that committees had asked for about £30m above their budgets and had been rebuffed, with P&R Vice-president Gavin St Pier having labelled the requests “completely unaffordable”.
Upon publishing the budget, De Sausmarez said: “Committees have not been given all that they have asked for, but we hope our colleagues appreciate the need for fiscal restraint in the current circumstances.”
Budget 2026 in under 60 seconds
P&R has recommended increases for committees of £12m above the initial cash limits.
The States’ chief executive has been tasked with finding £4m of savings next year.
Tax breaks for landlords
If the budget is approved at the States meeting starting on 4 November, the increased rate of document duty for property transactions that are not people’s principal residence will be removed.
The move is to try and stimulate the island’s rental sector where, according to De Sausmarez, a lack of rental stock had been causing rents to rocket.
Recent figures showed the average local market rent was £2,068 a month in the first quarter of 2025 – 1.5% higher than the previous quarter, 8.2% higher than the first quarter of 2024 and 51.7% higher than five years ago.
As part of the 2026 budget, in an effort to improve the quality of rental properties, the tax relief which can be claimed for property maintenance by landlords could also increase.
What’s going up?
The amount of money people take home in their pay packet is set to go up, as personal income tax allowances could increase by £600 to £15,200.
De Sauamarez said this was the primary measure in the budget to support people with the cost of living.
Tax on tobacco will increase by 13.7%, which equates to an extra £1.12 on a pack of cigarettes; while fuel duty is increasing at a rate higher than the cost of living is increasing, meaning a litre of petrol on average will cost 3.7p more.
Domestic property tax is also set for an above-inflation increase to 8.7%, with commercial rates set to increase by 5.4%.
As previously reported by the BBC, a new tax of £2.20 per 10ml of vape liquid is set to be introduced, with retailers saying they were “concerned” about the impact on the local industry.
Registering a new car could cost more next year as well, with the first registration duty going up by 8.7%.
What does it mean for GST?
The big levers of taxation are not being touched in this budget, as a review of the island’s corporate tax system and the planned introduction of a GST are currently under way.
Decisions on major infrastructure projects including whether the States will build a new dairy will be made next year.
One project which has secured funding in the budget is the island’s only sexual assault referral centre, which had originally been funded until the end of 2025.
