To think that I'm screwed if the VAT registration threshold is reduced to £30000

[Therapee]

I've just heard that this is one of the options being considered... If it happens, I can't see how my business will be viable. I've historically had a turnover of about £25k, and have just been busting a gut to get it over £30000 (I'll probably manage that for this tax year).

I'm a therapist, so my "sales" are to private individuals, not businesses. There's no way just of them will be able to pay an extra 20% per session, and I can't afford to absorb it.

Am I missing something here? I'm really hoping so. Help!!

Honestly no point agonising over it when we don’t know.

I’ve heard about 5000 possibilities that might be announced at the budget, no one knows what the reality is.

Where did you hear this?

It only went up to £90k last year.

It was actually my daughter who works at a chartered accountants.. she just mentioned that it's one of the things they're considering and I panicked! Here's a slightly obscure source: https://www.jonespeters.co.uk/news/business-news/archive/article/2025/September/lowering-vat-threshold-would-be-manifesto-breach-warns-ipse?utm_source=chatgpt.com

Yes as per a pp it’s only just gone up.

At the moment it seems to be think tanks throwing ideas around so I’m hoping it doesn’t happen

Is there a better source? That is just talking about newspapers. The media are out to kick Labour on nothing so not a great source.

@zazazaaar I couldn't find a better source, so maybe it is just pot-stirring bollocks. I hope so!

I could be wrong, but I think certain services are VAT exempt, including medical supplies. Do you fall into that category?

Google ‘VAT zero rated.gov’ and the UK gov website should list examples of what you have to/don’t have to charge vat on.

@NewspaperChips no, I think BACP has been lobbying for this, but mental health therapists aren't currently exempt. Mind you, I imagine very, very few of them even come close to the current threshold! I guess it would currently only affect organisations/group practices, rather than sole traders.

I think it makes a lot of sense on a national basis, there are a huge number of businesses that don't let themselves go over £90k to avoid it, drop to £30k and most will have to go over it and then won't stop at 90. There will always be some it doesn't work for, but nationally this makes more sense.

I used to be VAT registered, post-covid I reduced my working hours and de-registered. TBH, if the threshold was reduced to 30k, I'd just reduce my hours even further or totally stop.

While I have sympathy with where you find yourself, OP, and why you personally wouldn't want to see a reduction in the VAT threshold, I have to say this is something I find so odd about the VAT threshold and why I do think it needs reform. Why should it be 20% more expensive to use a group practice than a sole trader? Are we trying to actively discourage group practices - why? Why would we want, as a society/economy, to have something that means people actively, deliberately don't grow a business past a certain point because they'll have to be VAT registered? I honestly don't get it.

We are a micro service industry business.

Compared to the big groups our overheads are more expensive per head. We have to pay full rate for everything. Our software alone is 2k a year. Our computers 5k each. Big groups get a discount. They negotiate on the software and the computers. We have to have a loan for a van. They likely have a fleet on hire at discounted rates. It’s not the same. It levels the playing field for mini or starter businesses.

I guess I'm curious about the numbers of businesses likely to be affected. There's no way I'd ever get close to the current threshold, and I assumed there would be hundreds of thousands of very small businesses like mine who would likely go bust with a low registration threshold. But maybe there are even more businesses who are deliberately "hobbling" themselves, and perhaps that's where the bigger tax revenue is to be made?

From a mental health perspective, it's probably going to be disproportionately harsh on less well off people though. I try to keep my fees low enough to be reasonably affordable to your average Joe, and I know that several of my clients definitely wouldn't be able to afford a price hike.

We have managed to stay just under for the past 3 or so years. We aren’t trying to hobble ourselves. But if we go over we need to know we are going to fly through it and not be worse off.

As we are seasonal we know by the spring the leads and by the start of summer whether we will make it. Coming up to spring was great. We were like yes, maybe this is the year. Then trump crashed the world. All our leads fell through and it’s probably been our worst year yet actually. Somehow we have hobbled through.

This has happened probably last 4/5 years now. Something big every year. Huge uncertainty. Market crashes. Inflation. Covid. You name it. It’s been wild.

The best thing they can do for us is somehow stabilise, increase investment, give people confidence again even if that’s just stopping moving goal posts. Stimulate growth somehow! Increase disposable income for people. Stop inflation.

I would have assumed you were exempt for charging VAT but I see above you stated that’s not the case for therapy
however - if you have large overheads that you I assume pay VAT on to the larger companies you buy/lease from you will be able to reclaim this VAT paid to them back from HMRC as you will have to do a VAT return monthly/quarterly this may offset a bit of your VAT
you can also reclaim the VAT paid on your other business expenses for example your lunch, your ‘uniform’ if you wear your own smart clothes for work and the washing powder etc needed to keep these clean, your fuel and other vehicle costs for travel to/from places

Yes, I’ve heard Dan Neidle (not sure on the spelling but he’s a tax expert) talking about this being a good idea for this reason.

I’m not sure whether it’s something that has been credibly linked to the budget though - there’s all sorts of suggestions from various places flying around about what they should/could do.

My overheads are not that high, and the biggest ones are currently non-VAT (eg room rental from a small non-vat reg sole trader, supervision from non-vat supervisor). I just can't see how I could make it work! 😕 Hmm. I think the best plan is to just forget about this until the budget.

Yes deff try to forget about until anything official is announced!
if it does come to it you could always get a friendly accountant (or possibly yourself?) to look over your previous years profit and loss and balance sheet to see what you would have paid out for VAT vs what you could have claimed back, and then if there’s a large deficit you could also ask said friendly accountant for some advice re what you could do to increase your VAT claim.
i know of many self employed people or those who own their own companies who earn 6 figures a year and still end up having tax to claim back at the end of their financial years!