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VAT thresholdIt will come as a huge relief to small businesses to hear that Chancellor Philip Hammond resisted calls to lower the VAT registration threshold in last month’s Autumn Budget.


Rumours about this started circulating after The Office of Tax Simplification (OTS) made eight core recommendations for the government to clarify the VAT system ahead of the 2017 Budget announcement.

It called the current VAT registration threshold of £85,000 the most pressing issue in its Routes to Simplification report. The report claimed the UK registration threshold is the highest in the EU and £70,000 higher than the average VAT exemption around the world, which stands at £15,000.

While the UK registration threshold enables many small businesses to stay out of the VAT system, the OTS claimed recent increases could be costing the economy more than £2 billion a year.

Despite this, the chancellor has however decided to freeze VAT thresholds for two years in a move which has been warmly welcomed by the Federation of Small Businesses (FSB).

Mike Cherry, chairman of the FSB, commented:

“It was good to see the chancellor’s speech acknowledge our concerns about the VAT threshold. Dragging thousands more small firms into the hugely complex VAT regime would have caused a significant drag on output at an already challenging time for businesses. Small firms spend on average, more than a working week a year complying with VAT obligations. This is time which should be spent growing their firms.”

The government will complete a review of how the VAT system operates with possible reform and detailed proposals by March 2020.


If you would like more information about what was discussed in the Autumn Budget 2017 or you would like to discuss the VAT services we offer, please feel free to contact PKB Accountants and we will be more than happy to help.