VAT Registration Threshold and the 2024 Autumn Budget
The 2024 autumn budget is on the horizon and there is a lot of buzz around the VAT registration threshold increase. At Essendon, we are exploring if it would be more benefit to the UK if the budget was made either lower or higher.
As with any budget changes, there are reasons for and against this increase and whether it will be of benefit to the individuals and the economy.
Reasons for Increasing the Threshold
Although it seems worse for the economy to increase the threshold, a study from 2022/2023 showed that 75% of the total VAT collected within the UK was paid by traders and businesses that turned over £10m. This suggests that the hit on the economy would be relatively low. If we weren’t bound by EU rules, we could take this a step further and increase the threshold much higher without it having too much of an impact on the economy.
This increase in the VAT registration threshold would also encourage businesses to grow further. Many businesses are teetering on the edge of the threshold simply because of tax reasons. Moving the threshold would encourage them to invest and grow which will do a lot for the economy as time goes on.
Reasons for Decreasing the Threshold
Of course, along with the reasons for increasing the threshold, there are also reasons not to increase or to decrease it further. One of the main reasons is that it is thought that a decrease would promote economic growth.
Research from 2016 shows that many businesses either closed for part of the year or refused work, suggesting that that businesses were actively managing their workload, prices and transactions to stay below the VAT threshold. Decreasing the threshold could therefore discourage this behaviour, encourage economic growth.
Increased or Decreased VAT Threshold – Which is better for the economy
There are pros and cons to either increasing or decreasing the threshold. It is, therefore, extremely important that both sides are carefully considered when deciding the fate of the business world.
If you think your business is going to be affected by the 2024 VAT threshold changes, please contact us today.