On April 1st 2024, the UK government raised the VAT registration threshold from £85,000 to £90,000, as part of several new measures unveiled in the Spring Budget aimed at bolstering small businesses and promoting long-term economic growth.
This adjustment means that businesses now need to register for VAT if their annual turnover exceeds £90,000, up from the previous threshold of £85,000.
The requirement to register for VAT is determined by your business’s turnover, which is the total amount of sales generated over a year.
How much is VAT in 2024?
If your business’s annual sales exceed the new VAT registration threshold of £90,000, you must register your business for VAT.
This involves charging VAT on the goods or services you provide and adhering to the associated reporting and payment obligations.
This change is intended to ease the administrative burden on smaller enterprises and allow them more room to grow, before needing to comply with VAT regulations.
Once you have registered for VAT, understanding the various rates applicable to your goods or services is crucial.
The prevailing standard VAT rate is 20%, which applies broadly across most goods and services offered by businesses.
Nevertheless, there are specific categories where different rates come into play – some products and services have a lower rate of VAT applied to sales, whereas other products and services are exempt:
Reduced Rate of 5%
The lower rate of 5% VAT is applicable to certain items, such as domestic energy supplies, specific health products and children’s car seats, providing some financial relief on many essential goods.
Zero Rate
For some items, VAT is not charged at all. This zero rate covers a variety of goods, including essential items like children’s clothing, books, and most foodstuffs, ensuring that these remain affordable for consumers.
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