Nick Craggs explains the Finance Act changes you need to know about – because you’ll be examined on them.
Students studying AAT level 3 and most students studying AAT level 4 should be aware that the Finance Act assessed by the AAT changes on Monday 27 January. Until that date it will be the FA23 Finance Act; after that it will be the FA24 Finance Act.
There are currently practice assessments on the AAT learning portal for both Finance Acts, so be careful you are using the right one for the assessment you are sitting!
Every year there are students who have studied one Finance Act, but for a variety of reasons they need to sit their exam on the new Finance Act. This can be because life got in the way, or they need a resit, but the one question that always crops up is “do I need a new book?”
Being a farmer’s son from Yorkshire makes me about as tight as can be when it comes to money, but sometimes I do think that trying to attempt a tax exam with an out-of-date tax book is a false economy. I will leave the decision up to you, but I do think that to help you make the decision it might be useful to explain what has changed in each of the three tax units. Starting at level 3, we have the Tax Processes For Businesses unit. This is the tax unit where the least has changed. The VAT turnover threshold for both registration and deregistration have increased. However, both these figures are in the reference material anyway, so I tell students to not learn these and just look them up.
Similarly, the fuel scale charges have changed as well. However, I would be impressed if a student could memorise all of these. Again, you just need to know how they work and look them up in the reference material. Other than a few changes in the wording of the reference material for clarity, the deadlines for PAYE settlement agreement and PAYE and Class 1b have been removed.
Personal Tax at level 4 is another one where very little has changed. No new concepts have been introduced and, again, any assessable changes are included in the reference materials. However, the changes that have been introduced are things that students do tend to remember, so you need to be conscious of these. The dividend allowance has now halved to £500 and the Class 1 Primary NI rate between £12,570 and £50,270 has fallen from 12% to 8%. Finally, the annual exempt amount for capital gains has also halved to £3,000.
Business Tax is the unit where there have been the most changes this year. New content has been added as well as changes to various rates. Students now need to know that the cash basis is the default basis for adjusting profit and losses for tax purposes. They need to know you can elect to use the accruals basis and the difference between that and the cash basis.
In another addition, students need to be aware that the examiner now prefers students to claim the maximum AIA before they start to use full expensing in relation to capital allowances.
Then there are the expected rate changes; the Class 1 Primary NI change mentioned above is also in Personal Tax.
The corresponding Class 4 NI rate has fallen from 9% to 6%, and Class 2 NI is no longer assessable.
Then there is also the same reduction in the capital gains annual exemption reduction to £3,000 that is also in Personal Tax.
The biggest change is the change to basis periods. I used to LOVE basis periods (I was very much in the minority here). However, the rules have changed drastically. Now taxpayers are assessed on the profit they make in the tax year, no matter what accounting period it relates to.
This is quite a complicated subject to explain here, I just want to make you aware of it. You can, however, find a more detailed explanation of this at https://tinyurl.com/5yd3usd8.
Remember, FA23 is examinable until 27 January and then from that date ALL tax exams will be based on FA24. There is no crossover.
The format and the length of the exams haven’t changed, just some of the content. It is up to you if you feel you want to purchase up-to-date material, but a new tax book is always going to be cheaper than even a single resit.
- Nick Craggs, AAT distance learning director, First Intuition
