Increase to VAT threshold deemed a “missed opportunity”

  • Business Advice
VAT threshold increased to £90k
Peninsula Logo

Peninsula Team, Peninsula Team

(Last updated )

In a bid to support small business and sole traders, the Chancellor has increased the current £85,000 VAT threshold to £90,000

The £90,000 threshold will come in from 1 April, the first increase since 2017, although at £5,000 it is not likely to shift the dial.

The move is designed to support businesses and sole traders which often put off growth due to the VAT compliance costs.

Chancellor Jeremy Hunt said: ‘We should reward smaller businesses who make a big impact on our society and employ millions of people.

‘That’s why from April 1, we’re increasing the VAT registration threshold from £85,000 to £90,000 - cutting taxes for small businesses across the UK.’

Over 28,000 businesses will benefit in 2024-25 from no longer being VAT registered, the Treasury said.

The measure is set to cost £150m in 2024-25, rising to £185m in 2025-26.

Michelle Dale, VAT director at UHY Hacker Young, said: ‘The government should have been more generous in the increase in the VAT threshold.

‘Raising the threshold will encourage growth for the businesses that teeter over around the threshold without going over it. Many small businesses are thought to avoid growing their turnover so that they don’t have to bother with the complexity of VAT.

‘This is somewhat of a missed opportunity to achieve better growth. Raising the threshold more aggressively would have encouraged more growth amongst small businesses.’

This view was echoed by Gerry Myton, head of indirect tax at HW Fisher. ‘The increase in the VAT registration threshold from £85,000 to £90,000 only moves the glass ceiling to growth but it does not encourage businesses trading around the threshold to grow further,’ he said.

‘Reducing the threshold and the rate of VAT to say 19% while introducing point of sale pricing net of VAT would create a level playing field and ensure VAT rate changes are passed to consumers.’

Visit BrAInbox today where you can find answers to questions like Can I claim back statutory maternity pay?

Related articles

  • Peninsula charity partnerships


    A word from our founder: We’re excited to reveal our new charity partners

    At the start of the year, we asked our employees to nominate charities close to their hearts. And last month, we selected three brand new charity partners for Peninsula UK.

    Peter DoneGroup Managing Director and Founder
    • Business Advice
  • man signing an important document


    Two more HR updates are set to land this summer

    Last month, we gave you a roundup of all the HR changes that happened in April 2024. And from July, expect even more...

    Kate PalmerHR Advice and Consultancy Director
    • Employment Law
  • working


    Government to tackle 'non-compliance' in umbrella company market

    A Treasury minister has confirmed that a statutory due diligence scheme for businesses using umbrella companies is being considered.

    Peninsula Team Peninsula Team
    • Employment Law
Back to resource hub

Try Brainbox for free today

When AI meets 40 years of Peninsula expertise... you get instant, expert answers to your HR and health & safety questions

Sign up to our newsletter

Get the latest news & tips that matter most to your business in our monthly newsletter.