AAT’s response to Labour’s 2024 Budget

‘SME growth has been left standing still again’ by the Chancellor’s first Budget.

This afternoon the Chancellor of the Exchequer, Rachel Reeves, delivered her first Budget since the Labour Government took office in July. It was delivered against a challenging economic backdrop, and followed the Chancellor’s earlier statement this Summer in which she announced a series of controversial measures to address what she said was a £22bn overspend in in-year departmental spending.

Video: Analysis from AAT President Michael Steed MAAT

Comment from AAT CEO Sarah Beale

“For the last 14 years, SME growth has either been standing still or going backwards. Unfortunately, today, it looks like it’s standing still.

“The Chancellor has protected the UK’s smallest businesses from the worst of the tax rises, but we’d like to see more detail on how the Government will deliver on the Chancellor’s promise to ‘expand opportunities’ for the UK’s 5.5m small businesses to grow.

“We are extremely disappointed that the new Government didn’t grasp the nettle it needed to today to press ahead with making professional body membership mandatory for all paid-for tax advisors.

“We simply can’t afford inaction on cleaning up the tax advice market. Labour should reconsider their priorities if they want to bank on future revenue from this source.”

Key announcements

In her speech, the Chancellor said that the Budget was focused on delivering on the Government’s mandate to fix the foundations of the economy and to deliver change; including supporting investment to deliver on the Government’s growth ambitions and to restore economic stability to the UK economy. The measures announced today include £40bn of tax rises which the Chancellor says is essential to deliver stability to the UK economy.

The full Budget documents setting out the new policy measures announced on Wednesday can be found here, and a summary of the main announcements can be found below:

Taxation

• The rate of employer NICs will increase from 13.8% to 15% from 6 April 2025
• The Government will also reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028, and then increase it by Consumer Price Index (CPI) thereafter
• The Employment Allowance will be increased from £5,000 to £10,500, and the Government will remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NICs bills from 6 April 2025

Small Business

• The Government will bring forward a Small Business Strategy Command Paper in 2025. This will set out the Government’s vision for supporting small businesses, from boosting scale-ups to growing the co operative economy, across key policy areas such as creating thriving high streets, making it easier to access finance, opening up overseas and domestic markets, building business capabilities, and providing a strong business environment. The paper will complement the Government’s forthcoming Industrial Strategy and Trade Strategy

Education and Skills

• The Government will invest £6.7bn of capital funding in 2025-26, representing a real terms increase of 19% from 2024-25. Of this, £950 million will be allocated for skills capital. The Budget allocates £300m for further education, designed to enable young people to develop skills they require to enter the workforce
• In addition, £40 million will be invested to reform the apprenticeship levy into the growth and skills levy in order to meet the commitment to kickstart shorter and foundation apprenticeships in key sectors

Professional Standards

• An £36 million will be invested in modernising HMRC’s tax adviser registration services and the Government will mandate registration of tax advisers who interact with HMRC on behalf of clients from April 2026. This will be legislated for this in a future Finance Bill.
• The Government will require tax advisers to provide an Advanced Electronic Signature when making specified income tax repayment claims from 6 April 2025.

HMRC Services and addressing the tax gap

The Government has announced the following investment:

• £1.4 billion over the next five years to recruit an additional 5,000 HMRC compliance staff, raising £2.7 billion per year in additional revenue by 2029-30
• £262 million over the next five years to fund 1,800 HMRC debt management staff, raising £2 billion per year in additional revenue by 2029-30
• £154 million to modernise HMRC’s debt management case system
• £12 million to acquire further credit reference agency data to enable HMRC to better target their debt collection activities
• £52 million to digitalise the inheritance tax service from 2027-28 to provide a modern, easy-to-use system, making returns and paying tax simpler and quicker

Other reactions

Here’s what other accountants made of the budget.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.