VAT Thresholds for Small Businesses

4th June 2024

What has changed when it comes to VAT Thresholds for Small Businesses?


The Spring Budget this year introduced significant changes aimed at alleviating the administrative burden on small businesses in the UK. One of the key updates announced by Chancellor, Jeremy Hunt, was the increase in the VAT registration thresholds, effective from 1 April 2024. This adjustment is intended to provide small businesses with more breathing room for growth and to simplify their ongoing tax obligations.


Key Changes – Effective 1 April 2024

Registration Threshold: The VAT registration threshold has increased from £85,000 to £90,000

Deregistration Threshold: The threshold for deregistration has risen from £83,000 to £88,000


Understanding VAT Thresholds

VAT (Value Added Tax) thresholds determine the point at which a business providing ‘taxable supplies’ must register for VAT and start charging it on their sales. The threshold increase means that businesses with an annual taxable turnover below £90,000 are no longer required to register for VAT. Additionally, the deregistration threshold, which allows businesses to opt out of charging and reclaiming VAT, has been raised from £83,000 to £88,000.


Impact on Small Businesses

The threshold increase is estimated to benefit around 28,000 small businesses over the following year, as traders falling below the revised thresholds will no longer need to be VAT registered, significantly reducing ongoing compliance requirements and potentially improving cash flow. Moreover, businesses that primarily sell to non-VAT registered customers may be able to gain a competitive edge, by offering lower prices without VAT. However, some experts argue that a more substantial increase would have provided even greater relief and spurred more significant growth for small businesses. The threshold has been frozen for the past seven years and had it risen with inflation, it would now exceed £100,000.


Key Takeaways

The VAT threshold increase is a positive step towards reducing the administrative burden on small businesses, though it falls short of the increases some advocates had hoped for. By easing compliance requirements, this change allows small businesses to focus more on growth and innovation.


Get in Touch

In light of these changes, small business owners must reassess their financial strategies and ensure compliance with the new VAT thresholds. If you would like help understanding the VAT Thresholds for Small Businesses and how the changes may affect you, contact your local Whitings LLP office today.


Disclaimer - All information in this post was correct at time of writing.
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