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.
The HICBC is still tricky to get right, and we are always happy to help.