The Budget – A Summary for Bookkeepers

The October 2024 Budget announced significant changes that will shape the work of bookkeepers. Here are some of the highlights…

Tax Compliance and HMRC Updates

The government is investing in improving the capabilities of HMRC to strengthen tax collection and manage tax-related debts more effectively. This initiative aims to create more efficient systems that will not only streamline processes but also introduce new requirements for bookkeepers.

One of the expected changes is the implementation of more straightforward procedures for filing tax returns and registering tax advisers. This could mean that bookkeepers will need to adapt to these new processes and ensure they are compliant with the updated requirements.

As part of its broader strategy to close the “tax gap”—the difference between the taxes owed and the amount actually collected—the UK Government plans to recruit an additional 5,000 staff for compliance roles and 1,800 new employees specifically for HMRC’s debt management division. This increase in personnel is designed to enhance oversight and enforcement, ensuring that more tax is collected efficiently.

Moreover, HMRC will update the IT systems used for managing tax debts, which could improve the overall effectiveness and speed of tax collection and debt resolution processes. For bookkeepers, this means they will need to stay informed about the new systems and adapt their practices accordingly to support their clients in navigating these changes.

Making Tax Digital and Self-Assessment

The rollout of Making Tax Digital for Income Tax is increasing, which means that a larger number of people will be required to submit their tax information digitally over the next few years. This change is part of the UK government’s initiative to modernise tax reporting and improve efficiency.

Starting in April 2026, sole traders and landlords who earn more than £50,000 in qualifying income (before expenses) during a tax year will need to report their income through MTD ITSA. This requirement will extend to those with a lower threshold of £30,000 in qualifying income beginning in April 2027. Essentially, this means that as the initiative progresses, more individuals will need to adapt to digital reporting for their income tax, and bookkeepers will play a crucial role in helping clients navigate these changes.

Payroll and Reporting Changes

New regulations will mandate that employers provide additional information, such as workplace postcodes and details related to benefit payroll reporting. For bookkeepers, this is crucial because they must understand how to integrate this new information into their clients’ payroll processes. By being aware of the changes and adapting their practices accordingly, bookkeepers can help ensure that their clients remain compliant with the new rules and avoid potential issues or penalties. Essentially, bookkeepers will need to enhance their knowledge and skills regarding payroll management to maintain efficiency and accuracy in their clients’ financial reporting.

National Insurance and Employment Allowance Adjustments

Changes in employer National Insurance Contributions (NICs) thresholds and an expansion of eligibility for the Employment Allowance could affect payroll expenses for clients, particularly smaller businesses and those that employ veterans.

Specifically, the Secondary Threshold for employer NICs will decrease from £9,100 to £5,000 per year. This new threshold will be in effect until the end of the 2027/28 tax year, after which it will rise annually in line with the Consumer Price Index (CPI) inflation. As a result of this reduction, employers will be responsible for paying NICs on a greater portion of their employees’ earnings.

Additionally, the rate at which employers pay NICs will increase from 13.8% to 15%. This means that businesses will face higher payroll costs due to both the lower threshold and the increased contribution rate.

For bookkeepers, this means they need to be proactive in managing these changes and advising clients on their potential impact. Smaller businesses may feel the financial strain from these adjustments, so bookkeepers will need to help clients understand how to navigate the new thresholds and plan their budgets accordingly.