The UK government has announced that it will be increasing the VAT registration threshold for small businesses to £71,150 from April 2022, a rise from the current threshold of £85,000. This move will interface with small businesses across the country and will affect them in a variety of ways.
For small businesses, this threshold rise will make a significant difference in terms of whether they are required to register for VAT or not. The new threshold threshold will avoid companies from having to worry about VAT registration and paying administrative fees, which will benefit small businesses. However, small companies operating just below the new threshold may now consider increasing their sales levels in order to remain VAT-exempt.
Small traders who are already VAT registered will benefit from the increase since they will now be disqualified for VAT registration. This allows them to avoid paying VAT upfront on products acquired overseas and outside the EU – ultimately benefitting cash flow.
The downside of the new threshold, however, is that certain small companies may miss out on businesses as a result of the VAT registration change. Some businesses may feel that the £71,150 threshold will render them less credible than their rivals who have already registered for VAT, leading to a possible loss in client base.
Nevertheless, exemptions to the VAT threshold are most likely to be tested in the near future. Small businesses should keep themselves informed of all news published by the government, to stay informed of any possible changes that may affect their operations.
Overall, the £71,150 VAT threshold for small companies presents both pros and cons, but the changes will impact differently on different businesses. It is important for small enterprises to examine how the threshold applies to their particular position and adapt to it appropriately. In doing so, small businesses can better take advantage of the opportunities presented by the new threshold.
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