- The chancellor is considering raising the VAT registration threshold to £100,000 in the Autumn Budget 2025.
- This change would allow Personal Service Companies to generate an additional £10,000 before needing to register for VAT.
- Currently, PSCs must register for VAT when income exceeds £90,000 in a 12-month period.
- Rachel Reeves is reportedly leading a review of the VAT system, with the threshold increase as a key proposal.
- Critics argue the increase from £90,000 to £100,000 is not significant enough to impact growth.
- Some suggest a higher threshold, such as £120,000, to better support small businesses.
- The Federation of Small Businesses previously recommended a £100,000 threshold to address “bunching” below the VAT limit.
- Concerns exist about the “cliff-edge” effect, where businesses limit growth to avoid VAT registration.
- Suggestions include a sliding scale or grace period to make the system fairer.
Source: contractoruk.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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