New, higher threshold for paying VAT comes into force this week, helping some small businesses avoid the tax.
In what’s been described as a ‘boost for small business’, this week the UK government raised the VAT threshold from £85,000 to £90,000. The move means that 28,000 small businesses will be freed from paying VAT as part of the chancellor’s budget measures that were announced last month.
The change also comes alongside the fourth consecutive freeze in the small business multiplier for business rates. The measure is part of the £4.3 billion business rates support package announced at the 2023 Autumn Statement that includes the 12-month extension of the 75% relief for 230,000 Retail, Hospitality and Leisure (RHL) properties, also coming into force from 1st April.
Exchequer Secretary to the Treasury, Gareth Davies, said: “We’re rewarding work and backing Britain’s small businesses – the lifeblood of the economy and beating heart of communities – with support on VAT and business rates.
Combined with our decisive action to reduce inflation from over 11% to 3.4%, these measures will help ensure the local, independent businesses that many of us cherish most will continue to thrive and help our economy grow.
The news was welcomed by a number of bodies representing small businesses. Enterprise Nation’s Head of Policy & Government Relations, Daniel Woolf said his organisation welcomed this timely support from the government. “Freezing business rates for the fourth year running offers some stability for over a million small property owners,” he said.
“Extending the 75% discount for retail, hospitality and leisure firms will see 230,000 businesses breath a sigh of relief. And the 10-year rates relief for film studios shows the creative sector is being prioritised. Our innovative start-ups and entrepreneurs drive job creation and economic growth. Targeted relief like this provides a timely boost as small businesses navigate turbulent times. It’s great to see their needs being addressed.
Meanwhile, Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB), said it was a “A big day for small businesses. FSB has campaigned for decisive action to increase the VAT threshold, freeze business rates, and extend the retail, hospitality, and leisure discount and we’re pleased to these come in today.
April 6 will also mean a cut in National Insurance for the self-employed – the Government is right to take forward practical, impactful measures that help small businesses drive growth in all of our local communities.
VAT is a central part of the UK’s business and economic landscape and it can sometimes present a headache to firms unfamiliar with the collection and enforcement regime. To help you get a better understanding of how it works, we have produced a number of resources.
You can access them here.