"Despite advocacy from some think tanks, the Chancellor must not reduce the VAT threshold in the Autumn Budget,"
"The initial impact would be inflationary as more businesses become obliged to charge 20% VAT on top of any price increases to cover their additional compliance costs."
"A sudden, material reduction in the current £90,000 VAT threshold would bring large numbers of small businesses into the scope of quite a complicated tax,"
"The impact of higher prices on consumer spending is likely to hit business profitability and, in turn, investment and employment."
A proposed reduction of the VAT registration threshold from £90,000 risks immediate inflation as newly liable firms add 20% VAT and raise prices to cover compliance costs. Consumer-facing sectors such as hospitality, personal services, trades, and creative industries would be disproportionately affected. Increased administrative burdens and cashflow pressures would strain small firms operating on tight margins, undermining profitability and reducing capacity for investment and hiring. The combination of higher prices and added costs could suppress consumer spending, hamper productivity, and limit any significant net increase in government tax revenue.
Read at Business Matters
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