AAT reviews the Chancellor’s 2024 Budget

We summarise what should be the final budget before the general election and give reaction from the profession.

Chancellor Jeremy Hunt has delivered his second, and perhaps final Budget, ahead of the expected General Election later this year.

The big news for AAT was the decision to consider compulsory professional membership to drive up standards of tax advice. We also welcome measures that will help businesses and boost employment.
But there are also criticisms from the profession about the lack of a coherent investment plan to support skills and the effect of freezing thresholds on tax complexity.

Taxation

• The Government is cutting the main rate of Class 1 employee NICs from 10% to 8%. This will take effect from 6 April 2024. The Government will also make a further 2p cut to the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement.
• The current non-UK domiciled tax rules will be replaced with a new residence-based regime commencing on 6 April 2025. Transitional arrangements for existing non-doms will be put in place.
• The Government is announcing new metrics to measure progress against tax simplification. These will be drawn from HMRC’s annual customer survey and will include HMRC’s estimate of the net change in cost to businesses of meeting tax obligations from tax measures.
• A further set of tax administration and maintenance announcements will be made on 18th April 2024 at Tax Administration and Maintenance Day.
• The Government is extending the Energy Profits Levy (EPL) to the end of March 2029.
• From 1 April, the rate at which entities with UK annual revenue greater than £1bn, and which are regulated for Anti-Money Laundering purposes, will pay the Economic Crime (anti-money laundering) Levy will increase from £250,000 to £500,000 per annum.
• A new duty on vaping products will be introduced from 1 October 2026.
• The 2025-26 Air Passenger Duty rates for economy passengers will increase in line with forecast RPI, rounded to the nearest pound. Rates for those flying premium economy, business and first class and for private jet passengers will also increase by forecast RPI and will be further adjusted for recent high inflation.
• The Empty Property Relief “reset period” for Business Rates will be extended from six weeks to thirteen weeks from 1 April 2024 in England. The Government will also consult on a “General Anti-Avoidance Rule” for business rates in England, and has published a summary of responses to the Business Rates Avoidance and Evasion Consultation.
• The Government will maintain the starting rate for savings, the 0% band for savings income, at £5,000 from 6 April 2024 to 5 April 2025.
• The Government is launching a consultation to seek views on how best to implement the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard.
• Ministers will legislate in the Spring Finance Bill 2024 to ensure individuals cannot use a company to bypass anti avoidance legislation, known as Transfer of Assets Abroad (ToAA) provisions, in order to avoid UK income tax. The changes will take effect for income arising to a person abroad from 6 April 2024.
• From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC.
• From 6 April 2024, the higher rate of Capital Gains Tax for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. Private Residence Relief will continue to apply.
• The Government will abolish the Furnished Holiday Lettings tax regime, eliminating the current tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants.
• From 1 June 2024, Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty Land Tax regime in England and Northern Ireland, will be abolished.
• The Government will freeze alcohol duty from 1 August 2024 until 1 February 2025.
• The Government will freeze fuel duty rates for 2024-25.
• HMRC will establish an expert advisory panel to support the administration of R&D tax reliefs.

Small Business

• The VAT registration threshold will be increased from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000, and will be frozen at these levels. These changes will apply from 1 April 2024.
• The Government will publish shortly draft legislation on an extension of full expensing to assets for leasing. Full expensing will be extended to assets for leasing when fiscal conditions allow.
• The Recovery Loan Scheme has been renamed as the Growth Guarantee Scheme and extended until the end of March 2026.
• HMRC has published new guidance around the tax deductibility of training costs for sole traders and the self employed.
• The Government will legislate to reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor. Ministers will carry out further work to review the scope of the exemptions.
• The Government will shortly be launching the SME Digital Adoption Taskforce, which will investigate how best to support the adoption of digital technology by SMEs in order to boost their productivity.
• A new £7.4m AI Upskilling Fund pilot will be launched to help SMEs develop the AI skills of the future.

Professional Standards

• The Government is publishing a consultation on ways to strengthen the regulatory framework in the tax advice market. Three options – including compulsory professional body membership – are being considered (full story here).

HMRC Services

• The Government is investing a further £140m to improve HMRC’s ability to manage tax debts. This will expand HMRC’s debt management capacity to support both individual and business taxpayers out of debt faster and collect tax that is due.
• Ministers will also improve and simplify HMRC’s digital services to support Income Tax Self Assessment taxpayers seeking to pay tax in instalments. These changes will be implemented from September 2025.

Industry reactions

Jonathan Gorvin, Executive Director of Strategy and Compliance, gave AAT’s reaction:

“We see opportunities for small business in this Budget, and we certainly welcome the move to regulate tax practitioners.”

“We look forward to seeing more of the details in the coming weeks. However, so far there seems to be a lack of skills focus in the Government’s announcements. Employers are local communities are crying out for investment now in accountancy skills.”

Robert Marchant, VAT specialist and Head of Tax at Crowe UK said fiscal drag would hamper growth:
“Fiscal drag drags on. It’s disappointing that no steps were taken to reduce its impact. A continued freezing of tax thresholds results in an increase in those paying higher rates of tax and in additional tax complexity for many.”

Suzanne Gallagher, head of UK payroll at Employment Hero, was concerned about the workload from NI reductions:

“The end of the tax year is the busiest time of the year for accountants, and the chancellor just added a huge headache by cutting National Insurance Charges (NICs) at the last minute. Luckily, accountants and other payroll professionals are getting used to this kind of rapid change to tax rates – this is the fourth change to NICs since early 2022.”

Adam Zoucha, MD EMEA at accounting workflow provider, FloQast welcomed the decision to make full expensing of leased assets permanent:
“Companies have been gifted a cashflow lifeline. The opportunity to double-down on full expensing, will be welcomed by low-margin, low profit or loss-making businesses struggling to balance the books in a flat economy. Crucially, it will incentivise spending on longer-term investments vital to driving growth and productivity, while keeping cash in reserve.

“Economic conditions remain tough, and the onus is firmly on companies to build fiscal resilience and navigate a recessionary environment. Keeping tight control over financial processes and focusing on careful financial planning will be crucial to weathering the storm and pivoting in line with evolving market conditions as Britain heads towards the next general election.”

David Nunn is Content Manager at AAT.