Spring Budget 2024: VAT and Customs Duty
VAT has long been the poor relation when it comes to Budgets and Autumn Statements with minimal changes being made despite demands from businesses to reduce the burden.
The Chancellor has finally listened to one demand and will be increasing the VAT registration threshold with effect from 1 April 2024.
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Moving the cliff edge for SME’s – increase in VAT registration threshold to £90,000
Author: Andy Spencer, Director, VAT and Customs Duty Services
VAT got a mention in the Chancellor’s speech for the first time in a while with the announcement that the VAT registration threshold is being increased to £90,000 with effect from 1 April 2024. This is the first increase in seven years and has been a measure many businesses and advisors have been requesting for some time – it was one of the areas that Robert Marchant, Head of Tax at Crowe, predicted would happen in his recent article in Accountancy Age.
The deregistration threshold will be increased to £88,000.
This will impact businesses whose turnover is approaching the VAT registration threshold as it has been seen as a barrier to growth. If they remain below £90,000, they will not have to register and can continue to trade VAT free. A survey by the Tax Policy Associates calculated that 26,000 businesses were deliberately restricting growth for this reason. This ties in with HMRC’s internal calculations that 28,000 businesses will benefit from this measure.
It is good that HM Treasury has listened to the request to increase the threshold, but the increase is not significant given the many years of stagnation and recent levels of inflation. The cost in the 2024/2025 financial year is £150 million which is maybe why it has not been increased more.
This reduction in the number of businesses registering for VAT will reduce the burden on HMRC resources which continue to be stretched particularly when businesses do have to register when exceeding the threshold.
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Press coverage
- Revealed: the winners and losers of Jeremy Hunt’s Budget - The Telegraph
- Live blog of Budget 2024 - Evening Standard
- UK Chancellor announces non-dom reform and National Insurance cut - eprivateclient
- Live blog of Budget 2024 - Yahoo Finance
- Spring Budget 2024: Green industry funding and windfall tax extensions - Portfolio Adviser
- Chancellor should raise tax thresholds, say accountants - Accountancy Daily
- Mind your head (room)! What could we expect in next week's Budget? - Accountancy Age