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UK raises VAT registration threshold to £90,000

Annual threshold for compulsory VAT registration increases to £90k from £85k

The first rise in the UK VAT registration threshold in over eight years was announced today in the UK Budget. The threshold will rise to £90,000 from the current £85,000. This was set in 2017.

The increase will come into effect from 1 April 2024. In the previous budget, the Chancellor of the UK had committed to hold the threshold until April 2026. However, the inflation spike, and fiscal drag brining many more small businesses into the VAT net has led to today’s announcement.

The rise will take an estimated 28,000 micro-businesses out of the tax net.

Other details included:

  • For Northern Ireland, part of the EU VAT union as part of the Windsor Framework Brexit settlement, the registration and deregistration thresholds for EC acquisitions will increase from £85,000 to £90,000.
  • The threshold for deregistration will increase from £83,000 to £88,000.

At £90,000, the UK’s VAT registration threshold is higher than any EU Member State and the highest threshold in the Organisation for Economic Cooperation and Development (OECD) alongside Switzerland, and more than double their averages.

UK inflation dragged thousands of businesses into VAT net

As inflation soared above 10% last year, this meant thousands of micro-businesses faced a major tax-induced price rise which they have to consider passing on to their customers.

 

The UK’s VAT registration threshold (above which persons making taxable supplies are required to register and account for VAT) is currently set at £85,000, although businesses can opt to register voluntarily if their taxable turnover is below this.

The deregistration threshold for taxable supplies, currently £83,000, is set lower than the registration threshold to avoid businesses trading around the threshold level having constantly to register and deregister.

The UK has the highest registration threshold when compared to members of the EU and OECD. It keeps an estimated 3.6 million small businesses out of VAT. The average thresholds in the EU and the Organisation for Economic Co-operation and Development (OECD) countries are, respectively, around £28,000 (€31,000) and c£35,000 ($49,000).

Brexit haunts UK VAT rules

The Treasury said raising the VAT threshold to £90,000 would take 28,000 small businesses across the UK out of paying the tax. The change takes effect from 1 April and is the first increase in seven years.

Under the terms of the Northern Ireland protocol and the Windsor framework negotiated by Rishi Sunak, the UK must respect the EU’s €100,000 VAT threshold when setting VAT rules in Northern Ireland. This is so that businesses in Northern Ireland do not have a tax advantage over EU businesses, ensuring a “level playing field”.

Frozen threshold means doubling of firms holding off sales to avoid registration

The UK’s Office for Budget Responsibility has concluded that the freeze since 2017 of the VAT registration threshold has caused a long term bunching of businesses just below the £85,000 level. The graph below shows that since 2017-18 when the threshold first reached £85,000, the scale of the distortion below the threshold has been increasing, with 2019-20 the latest year for which outturn data are available. Relative to 2017-18, the number of firms capping their turnover is expected to have almost doubled from 23,000 to 44,000. And relative to a smooth distribution of firms by size, the lost turnover associated with this distortion among these traders is expected to have risen from £110 million to £350 million.

Chart 3C: Bunching in the VAT turnover distribution at the registration threshold

2024 EU VAT registration & Intrastat reporting threshold

Country VAT Registration thresholds Intrastat thresholds
Resident Non-resident Arrivals Dispatches Arrivals Statistical Dispatches Statistical
EU One-Stop Shop €10,000 €10,000 EU sellers only - - - -
Austria €35,000 Nil €1,100,000 €1,100,000 €12m €12m
Belgium €25,000 Nil €1,500,000 €1,000,000 €25m €25m
Bulgaria BGN 100,000 Nil BGN 1.65m BGN 1.9m €16m €37.2m
Croatia €40,000 Nil €450,000 €300,000 €450,000 €300,000
Cyprus €15,600 Nil €320,000 €75,000 €2.7m €5.8m
Czechia CZK 2m Nil CZK 15m CZK 15m CZK 30m CZK 30m
Denmark DKK 50,000 Nil DKK 22m DKK 11m DKK 22m DKK 11m
Estonia €40,000 Nil €700,000 €350,000 €700,000 €350,000
Finland €15,000 Nil €800,000 €800,000 €800,000 €800,000
France Goods €85,800 Services €34,400 Nil Discretionary Discretionary Discretionary Discretionary
Germany €22,000 Nil €800,000 €500,000 €49m €51m
Greece Nil Nil €150,000 €90,000 €150,000 €90,000
Hungary  HUF 12m Nil HUF 270m HUF 150m HUF 5.5bn HUF 15bn
Ireland Goods €80,000 Services €40,000 Nil €500,000 €635,000 €5m €34m
Italy €85,000 Nil See country guide See country guide See country guide See country guide
Latvia €50,000 Nil €350,000 €200,000 €5m €7m
Lithuania €55,000 Nil €550,000 €400,000 €7m €10m
Luxembourg €35,000 Nil €250,000 €200,000 €4m €8m
Malta Goods €35,000 Other €30,000 Nil €700 €700 €700 €700
Netherlands €20,000 Nil Discretionary Discretionary Discretionary Discretionary
Poland PLN 200,000 Nil PLN 6.2m PLN 2.8m PLN 103m PLN 150m
Portugal Nil Nil €600,000 €600,000 €6.5m €6.5m
Romania RON 445,500 Nil RON 1m RON 1m RON 10m RON 20m
Slovakia €62,500 Nil €1m €1m €1m €1m
Slovenia €50,000 Nil €220,000 €270,000 €4m €9m
Spain Nil Nil €400,000 €400,000 €400,000 €400,000
Sweden SEK 80,000 Nil SEK 15m SEK 4.5m SEK 15m SEK 4.5m
Non-EU
Bosnia BAM 100,000 Nil n/a n/a n/a n/a
Iceland ISK 2m Nil n/a n/a n/a n/a
Montenegro €35,000 Nil n/a n/a n/a n/a
Norway NOK 50,000 Nil n/a n/a n/a n/a
Russia RUB 8m (on application) Nil n/a n/a n/a n/a
Switzerland CHF 100,000 CHF 100,000 global income n/a n/a n/a n/a
Turkey Nil Nil n/a n/a n/a n/a
UK (Northern Ireland - EU Intrastat only) £90,000 (Apr 2024) Nil £500,000 £250,000 £24m £24m

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