Is 2024 a Year of Three Finance Acts?

With the Spring Budget announced for 6 March 2024, could we potentially see three finance acts in 2024?

Accountants and tax professionals like you will be keenly aware of the wider implications of rushed tax legislation or multiple Finance Bills, particularly with a general election in the offing for mid-to-late 2024.

This article looks at the prospect of up to three Finance Bill announcements in 2024 and what that might mean for you as accountants and your clients.

If you are an accountant in practice or industry and would like more information about becoming a 20:20 Innovation member, why not book a free 30-minute demo with our team today.

How can we have more than one Finance Bill?

Let's look at this from a pragmatic perspective. Finance Bill 2023-24 was published as draft legislation on 29 November 2023. This followed the Autumn Statement of 2023. Currently, the Bill is under scrutiny in parliament. Once any amendments are made and the Bill enacted, it will become the first Finance Act of 2024.

Since the Chancellor announced a Spring Budget would take place on 6 March 2024, we now know that a second Finance Bill will be published shortly thereafter. This will eventually become the second Finance Act of 2024, sometime this summer.

The announcement of an early Spring Budget has fuelled speculation that this is a prelude to a general election. If the election brings a change of Government, we can expect another Budget to take place within the weeks following the election. In this scenario, tax policy could change radically, leading to a third Finance Bill in 2024!

What is in the November 2023 Finance Bill?

Finance Bill 2023-24 focuses heavily on the abolition of the Pension Lifetime Allowance, which is due to come into effect on 6 April 2024. In fact, this takes up more than 100 pages!

There are, however, a number of other amendments and key measures which HM Treasury are introducing that will impact the UK tax system.

This Finance Bill is currently at the Committee Stage in the House of Commons and we expect it to receive Royal Assent before 1 April 2024.

What legislation is included in the Autumn Finance Bill?

Pensions lifetime allowance

Following on from announcements made in Budget 2023 and the removal of the Lifetime Allowance (LTA) income tax charge from 6 April 2023, the Lifetime Allowance itself will be removed from 6 April 2024. Alongside Finance (No 2) Act 2023, this is a significant piece of tax legislation. Why? Well, it means that no additional income tax, in the form of LTA income tax charges, will apply to pension savings income, regardless of the value of pension savings accumulated. The measure also paves the way for substantial inheritance tax savings when pension funds are left to beneficiaries.

The ability for an individual to receive 25% of their pension savings tax-free remains but, with the abolition of the Lifetime Allowance, the tax-free element is now capped at £268,275.

The remainder of an individual's pension income continues to be taxed at their marginal income tax rates.

Default cash basis proposals

The Finance Bill also includes measures to set the cash basis as the default method for calculating the trading profits of most unincorporated businesses. This will apply from 6 April 2024 but it will be possible to 'opt' back into the accruals basis of profit computation.

In readiness for this change, a number of restrictions from the current cash accounting regime will be removed, including the approach to relief for interest costs and losses. The turnover threshold, currently set at £150,000, will be removed altogether.

Full expensing is made permanent

Further to the Spring Budget of 2023 and new legislation introduced in Finance (No.2) Act 2023, the new leislation will make the new 100% first-year allowances (known as 'full expensing') for most of a company's expenditure on new plant and machinery permanent. This applies to what is known by accountants as 'main-rate' expenditure. A similar 50% first-year allowance for 'special rate' expenditure is also being made permanent in Finance Bill 2023-24.

Overhaul of Research and Development tax reliefs for companies

As part of a huge reform and following earlier consultation, the Finance Bill 2023-24 takes the steps required to merge and substantially amend the UK's Research and Development (R&D) tax relief schemes. This is one of the most substantial areas of the Bill for all firms of accountants to become aware of. The new scheme operates differently to the rules we have seen previously.

The provisions apply to accounting periods beginning on or after 1 April 2024.

In short, yes! Each time a Budget is delivered, it is followed by the next Finance Bill. Before a Budget, there is usually an opportunity for interested parties to review and comment on draft legislation and the details in the draft clauses.

The Finance Bill is then subject to parliamentary debate and eventually forms a new Finance Act. Explanatory notes to Finance Bills are usually very helpful in fuelling understanding.

Whilst divisive, it is worth noting that if the 6 March 2024 Budget is a prelude to an early (May) election, we may see this Finance Bill being fast-tracked through Parliament to Royal Assent, which is not usually good news for scrutiny and well-considered tax policy. It should also be noted that any opportunity for technical consultation or review of any proposed or draft legislation is likely to be very limited in this scenario.

We will therefore be scrutinising the published tax information and impact notes and key publications on Budget day carefully! Listening to the Chancellor's speech will also be key.

Does a new government mean a new Budget?

Should the Conservatives lose the next general election then a new government would likely want to hold a new 'emergency' budget in the following weeks. As with a Budget announced by the current government, this may well bring about tax reforms or other fiscal schemes that would require a new Finance Bill to be published.

So, again, in short the answer is yes!

Can 20:20 Innovation help with the Finance Bill(s)?

Yes, absolutely.

The first Finance Act of 2024 (from Autumn Statement 2023)

Leading tax expert Rebecca Benneyworth is hosting our Spring Finance Act webinar on 22nd March 2024.

We are also taking a designated look at the advice that accountants can give to their self-employed and partnership clients about cash accounting in this special webinar on 12 February 2024.

All of our webinars are available on-demand, after the live date.

Budget 2023 and the second Finance Act of 2024

On 7th March you will be able to join Tax Technical Director, Sharon Cooke, on our Budget Update webinar. This will be hot on the heels of Sharon and her team spending the previous 24 hours absorbing the Budget documents and any further information published.

This training will be free to all 20:20 Innovation members as well as anyone (including non-members) who purchases our Branded Budget PDF product. The training will even follow the order of our newsletter content to help accountants understand and communicate the changes to their clients.

We will also be offering an additional Tax Rates PDF product to support you in marketing your firm and communicating key tax data to business owners and other clients.

Later in the year, once the subsequent Finance Bill has received Royal Assent, Rebecca Benneyworth will be back with us for our Summer Finance Act webinar on 17 September 2024.

The Third Finance Act of 2024

Well, for this we'll need to await the date and results of the general election but you can be sure that 20:20 Innovation will be keeping accountants updated, informed and ready to communicate to their clients.

If you would like more information about joining 20:20 Innovation why not book a free 30-minute demo with our team today or call us on +44 (0) 121 314 2020.