PFS What's new bulletin - October II

TAXATION AND TRUSTS

 

Property rental income - non-EU residents now entitled to reclaim Spanish tax relief

(AF1, RO3)

 

A ruling by Spain's national court that landlords resident outside the EU have the same rights to tax relief on their Spanish property expenses as residents of Spain, the EU and EEA

This landmark decision allows thousands of British, American, and other non-EU investors to claim substantial tax refunds and significantly reduce future tax liabilities.

 

Until the decision (case SAN 636/2025), non-residents of either the EU or EEA have been taxed on the gross rental income without the possibility to deduct expenses such as interest, repairs, insurance, property tax (IBI) or community fees. This was the result of the non-resident income tax (NRIT) imposed by Royal Legislative Decree 5/2004. Article 24.1 of the decree established that non-residents without a permanent establishment in Spain had to pay tax on the full amount of income obtained, without the possibility of deducting expenses or applying reductions. By contrast, EU/EEA residents could deduct expenses directly related to the income obtained, resulting in ‘discriminatory’ treatment of third-country residents.

 

In July 2025, however, the Spanish national court issued a landmark resolution with significant implications for the real estate sector and international taxation in Spain. For the first time, it recognises the right of non-EU/EEA residents to deduct necessary expenses associated with the rental of properties located in Spain. This is in accordance with similar cases already decided by the Court of Justice of the European Union under the EU treaty principle of free movement of capital. One example was a September 2014 judgment addressing fiscal discrimination in inheritance and gift tax, which concluded that there must be no difference in treatment between residents and non-residents and that the free movement of capital must also apply to third-country residents.

 

The ruling marks a substantial shift in the tax regime applicable to non-EU/EEA residents obtaining rental income from real estate in Spain. Among the expenses now eligible for deduction are interest payments on mortgage loans, if the loan was used to acquire the property. Repair and maintenance costs are also deductible, along with the IBI and community fees, as they are inherent obligations of property ownership and management. Insurance premiums, utility costs and management and administration fees are also deductible if they are properly justified, directly related to the rental activity and supported by the landlord.

 

The Spanish tax authorities will require evidence of these costs and their direct connection to the rented property, such as invoices, receipts and contracts. The deductions must be applied in the NRIT tax return corresponding to the fiscal year in which the rental income was generated or within a maximum of four subsequent fiscal years if there was insufficient gross income to apply them.

 

However, the new ruling affects not only future tax returns but also previously filed self-assessments and claim refunds for undue payments, including delayed interest. Taxpayers are being advised to review their previously filed tax returns and reclaim overpaid tax if they paid tax on gross rental income without deductions.

 

 

Judge uses AI to summarise tribunal decision

(AF1, RO3)

 

A First-Tier Tribunal judge has used AI in the production of their decision - Evans v Revenue and Customs Commissioners [2025] UKFTT 01112 (TC)

 

VP Evans v HMRC [2025] UKFTT 1112 (TC) was a routine case management decision by the UK First-tier Tax Tribunal whereby the appellants challenged HMRC Closure Notices relating to Capital Gains Tax and offshore trust arrangements, involving the UK’s double taxation agreements with New Zealand and Mauritius. The issue was a disclosure application by the appellants, granted in part and decided on the papers.

 

What makes the case notable is that Tribunal Judge McNall added a postscript to the decision disclosing that he had made use of Microsoft’s Copilot Chat (via the secure and private eJudiciary platform) to summarise documents as a first draft.

 

The decision follows the Practice Direction on Reasons for Decisions (June 2024), which encourages using digital tools, including AI, to improve judicial efficiency; and the updated “AI: Guidance for Judicial Office Holders” published in April 2025. which confirms that ‘there is no reason why generative AI could not be a potentially useful secondary tool,' for summarising large bodies of text, so long as care is taken to ensure accuracy but warns against use of AI for legal analysis. Referencing the guidelines, Judge McNall affirmed that “I have used AI to summarise the documents, but I have satisfied myself that the summaries  are accurate. I have not used the AI for legal research.”

 

COMMENT

 

The case highlights the judiciary’s cautious but growing use of AI in administrative and case-management tasks through the use of their own private AI chatbot and signals that increasing use of AI is likely, particularly for procedural matters. However as stated above and in the guidance, AI tools are not recommended for the purposes of legal research or legal analysis so we are still a long way from AI generated judicial legal reasoning.

 

 

 

 

 

 

 

 

INVESTMENT PLANNING

 

HMRC urges 758,000 young people to claim their matured Child Trust Funds

(AF4, FA5, FA7, LP2, RO2)

 

Child Trust Funds. HMRC have urged 18 to 23 year olds to claim their matured Child Trust Funds as 758,000 remain unclaimed

 

In a recent press release, HMRC have urged young people to claim their matured Child Trust Funds (CTFs). Latest figures reveal that there are 758,000 CTFs that remain unclaimed, with the average account being worth more than £2,240. 

 

CTFs are long-term, tax-free savings accounts, set up for children born between 1 September 2002 and 2 January 2011 with the Government making an initial deposit of £250. At 16, the child can take control of their account and once it matures at ages 18, they can decide whether to withdraw the money or reinvest it. 

 

With September being the most common birth month, many 18 year olds are now eligible to claim their CTF pot but may not even realise it. Anyone aged between 18 and 23 is being urged to find their account by using the GOV.UK locator tool or if they are aware of their CTF provider, to contact them directly. 

 

Comment

It is important to note that no new CTFs can be created, with Government contributions ceasing from January 2011. CTFs were replaced by the Junior ISA (JISA) which was introduced in November 2011 with it being possible to transfer funds from a CTF into a JISA. You can read more about CTFs here.

 

ISA and crypto exchange traded notes

(FA5)

 

HMRC has confirmed that ISAs will be able to hold crypto exchange traded notes from 2026/27

There has been a change to the treatment of crypto exchange traded notes (cETNs) in the FCA COBS. The move, trailed in a quarterly consultation in June and effective from 8 October, means that cETNs are now available to UK retail investors, having previously been restricted to professional investors.

 

In response HMRC has issued a policy paper on the inclusion of cETNs in ISAs:

 

·       Initially, cETNs will be automatically eligible for inclusion in stocks and shares ISAs.

·       From 6 April 2026, cETNs will be reclassified as qualifying investments within the Innovative Finance ISA (IFISA).

·       Any cETNs that have been included in stocks and shares ISAs before 6 April 2026 will be treated as qualifying IFISA investments from that date.

 

The choice of IFISA has puzzled many. Hitherto the IFISA has been a very niche product which has mainly been used for investment in peer-to-peer lending. Only 13,000 subscriptions to IFISAs were made in 2023/24 out of a total of 15m ISA subscriptions and the total value of all IFISAs as at April 2024 was £847m, a mere 0.1% of the adult ISA total. 

HMRC says that it will “will keep the inclusion of cETNs in tax-advantaged accounts under review with a view to including them in the stocks and shares ISA at a later date as the market matures and as consumer understanding deepens.”

 

COMMENT

Technically, cETNs are not the same as the crypto ETFs which directly hold crypto currencies and have hoovered up vast amounts of money in the USA (the iShares Bitcoin ETF alone is worth $97bn). An ETN tracks an index (eg Bitcoin price), but its structure is strictly that of a debt instrument. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSIONS

 

The Triple Lock

(AF8, FA2, JO5, RO4)

 

The May-July total earnings growth figure is one of the three components of the Triple Lock calculation, the others being September CPI annual inflation and the 2.5% floor. In September the Office for National Statistics has said that the May-July earnings (including bonuses) was 4.7%, implying that would be the figure used for new and old state pension increases next April.

 

The ONS earnings data released on 14^th October revised the May-July figure to 4.8%, now matching the regular earnings (excluding bonuses) increase for the May-July period. Unless September’s annual CPI inflation number, due out on 22 October, is more than 1% higher than August’s, it is the earnings growth of 4.8% that will win the Triple Lock battle. 

 

Based on the revised 4.8% overall figure – and roundings may differ – the figures for next year’s state pensions are now:

 

Pension	2025/26 £ pw	2026/27 £ pw	Increase £ pw	Increase  £ pa
Old State	176.45	184.90	8.45	439.40
New State	230.25	241.30	11.05	574.60

 

The revised 4.8% increase compares with a projection of 4.6% in the last Economic and Fiscal Outlook from the OBR. At a revised annual £12,548, the new state pension will be just £22 below the personal allowance. 

 

COMMENT

In theory the figure could change again – the ONS is having data collection problems.

 

 

PPF publishes updated PPF 7800 index – October 2025

(AF8, FA2, JO5, RO4, AF7)

 

Since July 2007 the Pension Protection Fund has published the latest estimated funding position, on a s179 basis, for the defined benefit schemes in its eligible universe. This covers 4,969 schemes in the PPF-eligible universe, which is the same number as for the previous month. 

 

September 2025 update highlights:

 

·       The aggregate surplus of the 4,969 schemes in the PPF 7800 Index is estimated to have increased over the month to £255.1 billion at the end of September 2025, from a surplus of £238.9 billion at the end of August 2025.

·       The funding ratio at the end of September 2025 was 129.8%, compared to 128.1% at the end of August 2025.

·       Total assets were £1,112.2 billion and total liabilities were £857.1 billion.

·       There were 1,244 schemes in deficit and 3,725 schemes in surplus.

·       The deficit of the schemes in deficit at the end of September 2025 was £26.9 billion, down from £30.3 billion at the end of August 2025.

 

Funding comparisons

 

	September 2024	August 2025	September 2025
Aggregate funding position	£221.0bn	£238.9bn	£255.2bn
Funding ratio	123.5%	128.1%	129.8%
Aggregate assets	£1,160.8bn	£1,090.5bn	£1,112.2bn
Aggregate liabilities	£939.6bn	£851.6bn	£857.1bn
Dataset / Assumptions	Purple 24 / A11	Purple 24 / A11	Purple 24 / A11

 

The PPF 7800 index is published on the second Tuesday of every month, and the PPF publishes The Purple Book each year. 

 

 

Economic labour market status of individuals aged 50 and over - latest statistics

(AF8, FA2, JO5, RO4)

 

This latest publication details the trends over time, the economic labour market status of individuals aged 50, with comparisons  against 35 to 49-year-olds. Analysis is provided on the three headline measures used to monitor progress:

 

1. Employment rate of people aged 50 years and over, by five-year age bands and gender.
2. Average age of exit from the labour market, by gender.
3. Employment rate gap between people aged 50 to 64 and people aged 35 to 49 years, broken down by five-year age band and gender.

 

In addition to the measures outlined above, analysis is provided on wider characteristics of those aged 50 and over such as data on economic inactivity rates, reasons for inactivity, employment by industrial sector and region, employment by ethnicity and education as well as working patterns. When interpreting results, particularly comparing time periods, the Government points out that users should be aware of the potential effect of COVID-19 from 2020. 

 

This is an annual release, and the next release will be in September 2026. 

 

The main stories are:

 

• the employment rate for 50 to 64-year-olds decreased each year from a record high of 72.6% in 2019 (before the COVID pandemic) to 70.4% in 2022, from where it has increased each year since. There has been a small increase in this figure of 0.7% to 71.6% over the past 12 months.
• the employment rate gap between people aged 35 and 49 years and 50 to 64 years, has stayed approximately the same in 2025 (14.1%) as in 2024 (14.2%). This is due to an increase in the employment rate of people aged between 50 and 64 years and a smaller increase in the employment rate for those aged 35 to 49 years.
• of the countries in the UK, Wales had the lowest employment rate among those aged 50 to 64 years at 63.5%, with the highest employment rate in England at 72.4%. Wales has seen an increase in the employment rate of those aged 50 to 64 years from 2024 to 2025, with the employment rate increasing by 3.3% points.
• the employment rate gap between individuals with no qualifications and those holding any type of qualification was larger than any employment rate gap observed between the levels of qualification obtained. For example, the employment rate gap between individuals aged 50 to 64 years with no qualifications and those with ‘GCSE grades A-C or equivalent’ was 22.2% in 2025. This is statistically significantly larger than the employment rate gap between those with ‘GCSE grades A-C or equivalent’ and degree level qualifications, with the gap standing at 9.5% in 2025.
• the average age of exit from the labour market has increased for both men and women over the past year, once again reaching the highest recorded level on Office for National Statistics (ONS) data since annual reporting began in 1984, though this year’s increase is smaller than that between 2023 and 2024. In 2024, the average age of exit for men was aged 65.7years, increasing by 0.1 years to 65.8 years in 2025. The 2024 average age of exit for women was 64.6 years and has increased by 0.1 years to 64.7 years in 2025.
• the 2025 inactivity rate for 50 to 64-year-olds still remains higher than the pre-pandemic rate, which was 25.5% in 2019, but has decreased by 1.2% from 27.3% in 2024 to 26.1% in 2025.
• the inactivity rate continues to be higher for women aged 50 to 64 at 30.0% in 2025, compared with 22.0% for men of the same age.
• being sick, injured or disabled continues to be the main reason why people aged 50 to 64 years are economically inactive in the labour market. This was the main reason given by 44.7% of inactive adults.
• of economically inactive people aged 50 to 64 years, women (18.1%) were twice as likely as men (7.7%) to report ‘looking after home or family’ as the main reason for not looking for work, a statistically significant difference. Meanwhile, the proportion of men giving the main reason as ‘retired’ (32.5%%) was statistically significantly higher than women (26.9%).
• the State Pension Age (SPA) has a statistically significant impact on employment and inactivity rates of older adults. Between ages 65 and 66 the employment rate decreases by 12.8% and the inactivity rate increases by a similar proportion (13.9%).
• the rate of unemployment for 50 to 64-year-olds has increased by 0.7%, from 2.4% in 2024 to 3.1% in 2025. The unemployment rate for this age group has been fluctuating, though generally on a downward trend, over the past ten years, with lows of 2.4% in 2024 and 2.6% in 2022.
• the gap between 50 to 64-year-olds and 35 to 49-year-olds who are long term unemployed has significantly reduced from 4.4% to 1.6% over the last 12 months.
• around 876,000 individuals aged 50 to 64 are either actively seeking work, or are inactive but are willing or would like to work.

 

The Government has added that recent trends in employment should also be considered in the context of changes to SPA. Since 2010, women’s SPA gradually increased from 60 years, rising to 65 years by November 2018, at which point it equalled men’s SPA. In October 2020, SPA for both men and women increased to 66 years. The 2023 State Pension Age Review concluded that the planned increase in SPA from 66 to 67 will take place between 2026 and 2028. A further review of SPA will be conducted within two years of the current Parliament to consider age 68.

Working age is recognised internationally as people aged 16 to 64 years, whereby the SPA in the UK was formerly the upper limit. To understand trends over time, this release will continue to report on the 50 to 64 age group. However, data on people aged 50 to 65 years and more detailed tables containing statistics used in this release can be viewed in the tables accompanying this release.

 

In this report, employment and other labour market concepts used are defined in the same way as National Statistics published by the ONS in their Labour Market Overview. The ONS definitions can be found on the ONS website. Everybody aged 16 or over is defined as either employed, unemployed or economically inactive. Employed is defined as being in work, including those working part-time and those who are self-employed. Economic inactivity is defined as not working, have not been looking for work within the last four weeks or who are unable to start work within the next two weeks. Examples of economically inactive people include: people not looking for work because they are students; looking after the family or home; because of illness or disability; or because they have retired. Unemployment is defined as not working, have been looking for work within the last four weeks and are able to start work within the next two weeks. A common misconception is that the unemployment statistics are a count of people on benefits; this is not the case, as they include unemployed people not claiming benefits.

 

The average age of exit from the labour market is broken down for men and women due to the historic difference of SPA for men and women. In 1950, the average age of exit of men was aged 67.2 years. The average age of exit for men fell until 1980, when there was a change to the data source. Details of the change can be found in the background information and methodology. Since this point, the average age of exit for men has been steadily increasing.

In 2025, the average age of exit for men from the labour market was aged 65.8 years, the highest figure ever recorded since using ONS data and an increase of 0.1 years compared to 2024.

 

The average exit age for females in 1950 was 63.9 years, with the average age of exit for women falling to its lowest ever of 60.3 years in 1986. Since then, the average age of exit for women has increased by 4.4 years to 64.7 years in 2025, the highest level recorded since using ONS data.Between 2009 (before the change to SPA for women) and 2018, the period in which SPA for women incrementally increased from age 60 to 65 years to equal the SPA for men, the average age of exit for women increased by 1.5 years, from 62.4 to 63.9 years. The average age of exit of women continued to increase by 0.4 years to 64.3 years in 2020, when SPA for men and women increased to 66 years. Since 2021 the average age of exit for women has followed a similar upward trend to men, rising from 64.1 in 2021 to 64.7 in 2025. This includes an increase of 0.1 years over the past year from 64.6 years in 2024 to 64.7 years in 2025.