Change To VAT Registration Threshold

The VAT registration threshold, which had been frozen at £85,000 since 2017, was unexpectedly adjusted by the Chancellor, resulting in an increase to £90,000, effective from 1 April 2024. This update should be factored into ongoing financial planning for directors, especially where turnover is close to the registration limit and future growth is anticipated.

Moreover, from the same date, the threshold for taxable turnover determining eligibility for VAT deregistration has also increased from £83,000 to £88,000. This provides additional flexibility for businesses whose income may fluctuate from year to year.

Notably, for Northern Ireland, the registration and deregistration thresholds for EU acquisitions have been raised from £85,000 to £90,000, aligning these limits with the rest of the UK and simplifying cross-border VAT considerations.

This adjustment can have significant implications for businesses, particularly those in customer-facing sectors such as coffee shops and sandwich outlets. For directors, maintaining turnover just below the VAT registration threshold may appear beneficial in the short term, but crossing that threshold can materially affect pricing strategies, margins, cash flow, and administrative workload.

Directors need to stay informed about VAT regulations and thresholds, as failure to comply can result in penalties and legal consequences. Regularly reviewing financial performance against VAT limits and incorporating these considerations into wider financial planning for directors supports informed decision-making and long-term sustainability.

If you require guidance on understanding the impact of these VAT changes on your business and ensuring compliance with the updated thresholds, Scotia Financial offers expert support and tailored advice to assist directors with VAT strategy and financial planning.

Contact us for personalised support and insights tailored to your business needs.