Up to 28,000 small businesses set to receive financial boost following increase in VAT threshold
9th May 2024
As of 1st April the VAT registration threshold has been raised from £85,000 to £90,000. The VAT move is set to benefit up to 28,000 small businesses, who will no longer meet the threshold for VAT submissions. The change is in response to government recognition of the financial pressures facing UK business in the current economic climate and comes alongside the introduction of £4.3 billion of business rates relief.
VAT Thresholds
From 1st April the VAT registration and deregistration thresholds increased in line with an amend to the VAT Act 1994. The measure now puts the threshold at which businesses must register for VAT to a taxable turnover of £90,000 (from £85,000). It also allows for any businesses previously VAT-registered but now not meeting the threshold to deregister, should their taxable turnover go below £88,000.
The impact of the threshold changes has been estimated at removing £5m of administrative burden per year from small businesses, with 28,000 fewer microbusinesses required to be VAT-registered in 2024-205 and a further 14,000 fewer per year between 24/25 to 28/29.
Exchequer Secretary to the Treasury, Gareth Davies, said,
“We’re rewarding work and backing Britain’s small businesses– the lifeblood of the economy and beating heart of communities – with support on VAT and business rates.”
The move will mean an estimated total of 3.2 million small UK businesses now not needing to register for VAT. The new £90,000 threshold gives the UK a higher threshold than any EU member state and the highest threshold in the Organisation for Economic Cooperation and Development (OECD) alongside Switzerland.
Business Rates
A further move came in the freezing of the business rates small business multiplier for the fourth year running, meaning some 1 million business rates payers will continue to benefit from this 6.6% reduction in bills. This is over and above the year-long extension of the additional relief offered to Leisure, Hospitality and Retail businesses – equating to a 75% reduction in rates.
“This is a big day for small businesses. FSB has campaigned for decisive action to increase the VAT threshold, freeze business rates, and extend the retail, hospitality, and leisure discount and we’re pleased to these come in today,” said Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB).
VAT Support from TTR Barnes
If you are affected by these changes, or require support with your VAT calculations and submissions, please do not hesitate to contact our friendly team.
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All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.
