If they weren’t exactly rabbits out of the hat, Spring Budget 2024 still sprang its share of surprises.
VAT registration limit
Having been frozen at £85,000 since 2017, the VAT registration threshold wasn’t expected to change until at least March 2026. The Chancellor decided otherwise.
With effect from 1 April 2024, the VAT registration threshold has increased to £90,000. Also with effect from 1 April 2024, the threshold for taxable turnover determining whether you can apply for deregistration, has increased from £83,000 to £88,000. For Northern Ireland, the registration and deregistration thresholds for EU acquisitions increased from £85,000 to £90,000, effective from the same date.
In business terms, the VAT registration threshold can be a cliff-edge, especially for predominantly customer-facing businesses, like coffee shops and sandwich outlets. Business performance and profitability can feel comfortable where turnover is just below the VAT registration threshold, but take the step beyond, into the VAT regime, and viability can change considerably.
We are more than happy to help you assess the impact on your business of registration or deregistration — or indeed, any aspect of the VAT rules. If you have any queries, please do get in touch.
High Income Child Benefit Charge
The Budget also brings change to the High Income Child Benefit Charge (HICBC).
The charge has attracted considerable criticism over the years. Two key issues are the relatively low level of income at which it kicks in, and HMRC’s poor track record when it comes to communicating liability to pay the charge. It is still not widely appreciated that it is the responsibility of the higher earner to pay the charge, even if they are not the one making the Child Benefit claim.
Until 6 April 2024, the rules were that HICBC applied where one of a couple received Child Benefit, and either one or both partners had adjusted net income over £50,000. The charge then clawed Child Benefit back at a rate of 1% for every £100 of income between £50,000 and £60,000. By the time income was £60,000, any financial benefit in claiming was lost.
So what’s changing? From 6 April 2024, the threshold at which HICBC starts to apply changes. It becomes £60,000, rather than £50,000; and the taper now runs to £80,000, rather than £60,000. The change means that HICBC
is now charged at 1% for every £200 of income above £60,000, and the full charge does not apply until income exceeds £80,000.
This means many people who have previously opted out of receiving Child Benefit payment, may now want to reconsider their position.
Claims for Child Benefit can now be made in the HMRC app, or online, by post or by phone. New claims are automatically backdated for three months, or the date of the child’s birth, if later. If you make a new Child Benefit claim on or after 6 April 2024, any backdated payments will fall under the new 2024/25 rules, with the new income threshold of £60,000 applying. If, having previously had a Child Benefit claim and opted out of actually getting the Child Benefit payments, you now decide to opt back in, you can choose when to start payments. If payments restarted before 6 April 2024, you may be liable to pay the HICBC for 2023/24: but if payments restart from 6 April 2024, the new limits apply. If there is a liability to HICBC for 2024/25, you or your partner should file and pay any charge via self assessment by 31 January 2026.
Looking to the future, the government says it will move towards assessing eligibility according to household income, rather than individual income. This, however, is ambitious in terms of data collection, and change is not expected before at least April 2026. There might also be concerns that it goes against the principle of independent taxation.
If you would like more information or any advice on this article then please contact us by emailing solutions@ellacotts.co.uk or call us on 01295 250401. You can also contact us here with your query and we will get back to you.
Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
