NEWS

Drop in VAT threshold would be a breach

Lowering the threshold for VAT registration would breach Labour’s manifesto, IPSE, the Self-Employed Association has warned.

IPSE says that the government is in a bind both politically and economically. Having ruled out tax rises on ‘working people’ and hiking employer National Insurance contributions (NICs) the Chancellor’s options are limited.

IPSE asks, in these circumstances will Ms Reeves reform taxes rather than raising them?

Sole traders are required to register for, charge and pay VAT once their annual turnover goes over £90,000.

IPSE says this threshold can put a ceiling on the ambitions of sole traders earning close to that amount; they may be reluctant to artificially increase the price of their services by 20%, giving customers and clients a reason to buy from competitors.

Newspaper reports say that the Treasury is now considering slashing the threshold to as low as £30,000.

Fred Hicks, Senior Policy and Communications Adviser at IPSE, said:

"This would make registering for VAT unavoidable for anyone whose main source of income is from self-employment, and then some.

Cutting the VAT registration threshold is not the same as increasing rates of VAT – even if it ultimately ends up with more people having to charge and pay it. And if this radical reform did go ahead, this may well be how government justifies it.

But make no mistake – in IPSE’s eyes, it absolutely would be a breach of their commitment – and a breach of faith – to claim that dragging people into paying a new tax is not the same as putting their taxes up."

READ MORE

17/09/2025