Ilyas Patel Accountants in Preston
Ilyas Patel Accountants in Preston
The latest UK budget introduces significant shifts for employers, taxpayers, and investors, with changes in National Insurance, inheritance tax reliefs, and new taxes for non-domiciled residents – tax planning following this budget is essential.
These adjustments, set to start from April 2025, will affect both small businesses and individual taxpayers, presenting new financial planning challenges and opportunities.
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On 1 April 2024, the VAT registration threshold was raised to £90,000, a significant increase from the previous £85,000 limit that had been in place since 2017.
This adjustment, introduced in the Spring Budget, aimed to align the threshold with inflation and provide more breathing room for small businesses.
Businesses that exceeded the threshold needed to register for VAT based on either the historic turnover test or the future turnover test.
The historic test considered taxable supplies over the past 12 months, while the future turnover test assessed whether your business was expected to exceed the threshold in the next 30 days.
For those who crossed the threshold, it was crucial to inform HMRC within 30 days to avoid penalties.
Late registration could result in tax-geared penalties, so keeping track of your turnover has been essential for maintaining compliance.
Even if your business turnover was below the new £90,000 threshold, voluntary VAT registration remained an option.
Voluntary registration allowed businesses to reclaim VAT on purchases, which could boost cash flow.
However, this decision came with added administrative responsibilities, so businesses needed to carefully evaluate whether voluntary registration made sense for them.
Since 5 August 2024, businesses and agents have been required to update VAT registration details through the Agent Services Account, replacing the use of form VAT484 and other postal or digital methods.
HMRC’s focus on digitalisation meant that exceptions were limited to those unable to use digital services. For these cases, such as digitally excluded individuals, paper forms could still be requested from HMRC.
With HMRC’s VAT Registration Service (VRS) having launched in August 2022, all businesses registering for VAT have automatically been signed up for Making Tax Digital (MTD).
This ensured that all VAT-registered businesses complied with the digital record-keeping and submission requirements unless they applied for an exemption.
Agents were instructed to use the correct access routes for the VRS, as using outdated portals led to complications, including unnecessary identity verification steps.
Accessing the VRS correctly has been essential for a smooth registration process.
As part of HMRC’s move towards full digitalisation, paper form VAT1 was withdrawn on 13 November 2023.
Since then, all VAT registration applications must be made online, except for specific cases, such as for overseas partnerships or entities without a Unique Taxpayer Reference (UTR).
This shift marked HMRC’s commitment to simplifying and streamlining the registration process.
The VAT registration threshold increased to £90,000 on 1 April 2024, introducing changes that businesses needed to comply with.
Monitoring turnover, registering within the required timeframes, and keeping up with HMRC’s digital requirements have been crucial to avoid penalties.
If you’re unsure about your VAT obligations or need help navigating the changes, Ilyas Patel Accountants are here to help you stay on track.
Fill out our form here for any questions, give us a call at 01772 920579, or message us on our WhatsApp for out of office hours.
Kind regards,
Ilyas Patel