In a move aimed at easing the burden on entrepreneurs and small and medium-sized enterprises (SMEs), the UK government has announced an increase in the VAT registration and deregistration thresholds, effective from April 1, 2024.

Key Highlights

VAT Registration Threshold Increase

• The taxable turnover threshold for VAT registration has been raised from £85,000 to £90,000.
• This means businesses with an annual taxable turnover below £90,000 will not be required to register for VAT.

VAT Deregistration Threshold Increase

• The taxable turnover threshold for deregistering from VAT has increased from £83,000 to £88,000.
• This allows businesses to remain VAT-registered without constantly having to deregister and re-register around the threshold.

Northern Ireland Acquisitions Threshold Increase

• For businesses in Northern Ireland, the registration and deregistration thresholds for acquisitions have also increased from £85,000 to £90,000.

Highest VAT Threshold Among OECD Countries

• With this increase, the UK now has the joint-highest VAT registration threshold in the Organisation for Economic Co-operation and Development (OECD), alongside Switzerland.
• The UK's threshold is more than double the average thresholds of the EU and OECD countries. This keeps the majority of businesses out of VAT altogether.

The policy aims to support small businesses by reducing their administrative and financial burdens associated with VAT compliance. It is estimated that approximately 28,000 fewer micro-businesses will need to be VAT-registered in the 2024-2025 fiscal year, resulting in an overall administrative burden reduction of £5 million per year.

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