Reeves VAT bombshell: Small firms face 30,000 registration threshold in Budget shake-up

"Small businesses are bracing for a major shake-up after it emerged the Treasury is considering slashing the VAT registration threshold from £90,000 to just £30,000. The move, reportedly under review ahead of the November 26 Budget, would pull tens of thousands of sole traders and small firms into the VAT system for the first time, forcing them to charge customers more and deal with additional red tape."

"The change is being examined as part of Chancellor Rachel Reeves's hunt for up to £30bn in extra revenue following warnings from the Office for Budget Responsibility that Britain's productivity outlook will be downgraded. The cut could deliver billions to the Exchequer by widening the tax net, but critics warn it risks hammering independent businesses already squeezed by high inflation, weak consumer demand and rising borrowing costs."

"Analysts said the measure would be felt most sharply by small traders such as electricians, builders, hairdressers and consultants, many of whom deliberately keep their turnover just under the current £90,000 threshold to avoid registration. Lowering the bar to £30,000 would leave far fewer with that option, raising prices for customers and adding to paperwork burdens. Business groups have previously described such a move as a "tax on ambition" that discourages growth."

The Treasury is considering slashing the VAT registration threshold from £90,000 to £30,000 ahead of the November 26 Budget. The cut would pull tens of thousands of sole traders and small firms into the VAT system, forcing them to charge VAT, raise prices for customers and add paperwork. Chancellor Rachel Reeves is examining the option to help raise up to £30bn after warnings from the Office for Budget Responsibility about a downgraded productivity outlook, and the change could deliver billions by widening the tax net. Analysts and business groups warn the move would hit tradespeople and small service providers who keep turnover below the current threshold, calling it a 'tax on ambition' that risks trapping firms in 'VAT limbo'. The Treasury has declined to comment while modelling other revenue options including freezes to income tax thresholds, levies on pensions and duties on sugary snacks.

Read at Business Matters