UK Mandatory VAT Registration Threshold Increase

The UK’s current VAT registration threshold of £85,000 per annum is set to rise to £90,000 on 1st April 2024. This adjustment was initially planned to be deferred until April 2026, but the recent spike in inflation has led many small and medium-sized enterprises (SMEs) to exceed the threshold. The increase aims to reduce the number of micro-businesses required to register for VAT mandatorily. However, businesses can still opt to voluntarily register for VAT even if their turnover is below the new threshold.

De-registration Threshold Update

Alongside the increase in the registration threshold, the de-registration threshold will also rise from £83,000 to £88,000. This lower de-registration threshold helps prevent businesses from constantly hovering around the threshold, thus avoiding the need for repeated registration and de-registration.

Comparison with the EU

It is noteworthy that the UK continues to have the highest local VAT registration threshold compared to EU member states. However, due to the Windsor Framework and the Northern Ireland Protocol negotiated by Prime Minister Rishi Sunak, the UK must respect the EU’s VAT thresholds for Northern Ireland. This ensures that businesses in Northern Ireland do not have a VAT advantage over their EU counterparts.

Implications for Northern Ireland

For Northern Ireland, the registration and de-registration thresholds for EC (European Community) acquisitions will increase from £85,000 to £90,000. This alignment with the EU thresholds is crucial to maintaining fair competition between Northern Ireland and EU businesses.

The upcoming changes to the VAT thresholds are designed to ease the administrative burden on small businesses and reflect economic adjustments due to inflation. It is essential for businesses to stay informed about these changes and plan accordingly to ensure compliance and optimal financial management. For further details and updates, businesses should consult the HMRC website or seek advice from a tax professional.