“Budget Changes Poses £30,000 Registration Hurdle for Small Businesses”

Small enterprises are preparing for a substantial upheaval following reports that the Treasury is contemplating reducing the VAT registration limit from £90,000 to merely £30,000.

This action, allegedly under consideration prior to the November 26 Budget, would bring tens of thousands of individual traders and small businesses into the VAT framework for the first instance, compelling them to increase prices for consumers and navigate additional bureaucracy.

The amendment is being scrutinized as part of Chancellor Rachel Reeves’s quest for up to £30bn in additional revenue after alerts from the Office for Budget Responsibility that the productivity outlook for Britain will be downgraded. The reduction could yield billions for the Exchequer by broadening the tax base, but detractors caution it endangers independent businesses already pressured by soaring inflation, low consumer demand, and escalating borrowing expenses.

Experts indicated that the policy would impact small traders such as electricians, builders, hairdressers, and consultants the most, many of whom intentionally maintain their income just below the current £90,000 limit to sidestep registration. Reducing the threshold to £30,000 would leave significantly fewer with that choice, leading to increased prices for consumers and additional paperwork requirements.

Business associations have previously labeled such a strategy as a “tax on ambition” that inhibits growth. The Federation of Small Businesses has consistently contended that a drastic decrease in the threshold would ensnare emerging firms in “VAT limbo,” where they are compelled to pass on higher costs yet struggle to compete with unregistered competitors.

Although the Treasury has declined to comment on “speculation” ahead of the Budget, insiders suggest that the option is being evaluated alongside other tax-generating concepts – including an extension of the freeze on income tax thresholds, taxes on pensions, and potentially new duties on sugary foods.

Should Reeves move forward, it would signify one of the most considerable revisions of VAT in decades, possibly transforming the environment for Britain’s 5.5 million small enterprises.