VAT Threshold Modeller
The OBR flagged the £90,000 VAT threshold as “anomalously high.” If it drops, businesses just below the current threshold could face significant margin erosion. Model the scenarios.
Scenario Comparison
Current threshold: £90,000. Your revenue of £80,000 is below the current threshold.
If threshold drops to
£60,000
You become VAT registered
Yes
VAT liability
£16,000
Margin erosion
-9.5pp
Effective margin
20.5%
If threshold drops to
£70,000
You become VAT registered
Yes
VAT liability
£16,000
Margin erosion
-9.5pp
Effective margin
20.5%
If threshold drops to
£75,000
You become VAT registered
Yes
VAT liability
£16,000
Margin erosion
-9.5pp
Effective margin
20.5%
Decision Window
Status: Consultation stage. No decision has been made. Earliest possible implementation would be April 2027. You have 12-18 months to model scenarios and adjust pricing.
Recommended Tool
FreshBooks
Accounting software built for small business owners. Invoicing, expenses, tax reporting — MTD-compatible from day one.
Start Your Free FreshBooks Trial →Frequently Asked Questions
- What is the current UK VAT threshold?
- The current VAT registration threshold is £90,000 of taxable turnover in a rolling 12-month period (2025/26).
- Will the VAT threshold change?
- The OBR has flagged the threshold as 'anomalously high' compared to international standards. A reduction to £60,000-£75,000 is under discussion but no decision has been made.
- What happens when I register for VAT?
- You must charge VAT on your sales (20% standard rate), submit quarterly VAT returns, and can reclaim VAT on business purchases. Your prices may need to increase.