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VAT Registration Threshold: SMEs
24 June 2025
Lead MP
Peter Bedford
Mid Leicestershire
Con
Responding Minister
James Murray
Tags
EconomyTaxationEmployment
Word Count: 11004
Other Contributors: 14
At a Glance
Peter Bedford raised concerns about vat registration threshold: smes in Westminster Hall. A government minister responded.
Key Requests to Government:
I ask the Minister to show real support for small businesses by committing to review the VAT registration threshold and pushing it beyond £90,000 to encourage growth and reduce regulatory compliance costs.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Lead Contributor
Businesses in the UK have to be VAT registered when their turnover reaches just £90,000—an arbitrary figure. This poses challenges for small businesses like Chris and Annie Ensell's wedding photography business, Bloom Weddings, who face the agonising decision between limiting the number of weddings they agree to service or passing on increased costs to their customers.
Inverness, Skye and West Ross-shire
Supports increasing the VAT threshold for small business growth, citing personal experience in mentoring early-stage companies and highlighting shortages of skilled tradespeople due to current restrictions.
Daisy Cooper
Lab
St Albans
Sole traders and small businesses are vital to local economies, bringing vibrancy and supporting growth. She raises concerns about the impact of national insurance changes and business rates on these entities. Calls for a review of the VAT regime and simplification to support small business growth. Argued for better support from the Treasury to help small businesses navigate bureaucratic challenges, lacking large HR functions or support networks.
Gareth Davies
Con
Grantham and Bourne
Congratulates Mr Bedford on the debate, noting that small and medium-sized businesses account for significant employment and turnover in the UK private sector. Stressed the significance of three-fifths employment in small businesses facing significant economic challenges from recent policy changes.
Gregory Campbell
DUP
East Londonderry
The hon. Member highlights the complications the Windsor framework is creating for small businesses in Northern Ireland and agrees that SMEs are the backbone of the UK economy in all regions, requiring efforts to reduce bureaucracy. Agrees with Jim Shannon's concerns and points out that inflation is pushing businesses over the VAT threshold despite attempts to stay below it.
James Murray
Con
Inverness East, Nairn and Highlands West
Responding to Robbie Moore's concerns, James Murray argues that the stability restored by his Government is essential for investment and growth. He points out that difficult decisions were necessary to stabilise public finances inherited from previous governments.
Jim Shannon
DUP
Strangford
Acknowledged the limitations imposed by the Windsor framework on raising the VAT threshold in Northern Ireland. Asks whether there are circumstances under which a VAT threshold of £250,000 could be considered to help businesses grow by enabling them to hire more employees or apprentices. He suggests this would aid economic recovery. Expressed frustration about the Windsor framework constraining Northern Irish businesses, hindering their competitiveness compared to those in the rest of the UK.
Lewis Cocking
Lab
Stockton South
Current VAT rules discourage business growth by adding costs and competitive disadvantages when crossing the threshold. Business owners in Broxbourne seek a taper mechanism to ease into VAT registration. He challenges James Murray to name businesses in his constituency that support the current direction of government policies towards business growth and stability. He implies that such evidence is lacking. Expressed frustration with the lack of a taper mechanism in the current VAT system, advocating for its inclusion to benefit growing small businesses.
Mike Martin
LD
Tunbridge Wells
Questions whether regretting the leave vote might alleviate problems in Northern Ireland, highlighting ongoing issues due to EU interference. Inquired about the cost of meeting with a shadow Minister. Asked the Minister to consider lowering VAT rates for hospitality and tourism sectors.
Angus MacDonald
SNP
Inverness, Nairn, Badenoch and Strathspey
The MP notes the severe impact of recent economic policies on businesses in his constituency, particularly due to national insurance increases. He suggests that the Government should visit affected areas to understand the situation better.
Bedford
Lab
Mid Derbyshire
Asks the Minister to review the VAT registration threshold, highlighting its benefits for local communities and small businesses.
Campbell
DUP
East Londonderry
Made an intervention supporting the hon. Member for Strangford on the same issue regarding the Windsor framework.
MacDonald
SNP
Inverness, Skye and West Ross-shire
Asked if raising the VAT registration threshold from £85,000 to £90,000 was a favour for small businesses. Expertise in VAT highlighted potential benefits of reviewing the threshold for apprenticeships and skill training in small businesses.
Robbie Moore
Con
Keighley and Ilkley
The hon. Member agrees that the Labour Government does not understand how small businesses operate, as evidenced by measures such as VAT registration and increased national insurance contributions. Discussed the impact of VAT threshold on small businesses, citing the fish and chip industry as an example. Focused on the challenges faced by fish and chip shop industries due to being close to the VAT registration threshold.
Susan Murray
SNP
Mid Dunbartonshire
SMEs are crucial to the economy, contributing to innovation and local growth. The VAT threshold at £90,000 creates a barrier for businesses trying to grow. Discussed the complexity of the tax system for local businesses and the need for support fostering community pride.
Government Response
James Murray
The Exchequer Secretary to the Treasury
Government Response
Addressed concerns about the VAT threshold, noting it is higher than any EU member state's except one. Stated there are no plans to change the VAT registration threshold design or introduce a taper mechanism. Emphasised economic growth as key support for small businesses and outlined government measures to aid business growth. The Minister emphasises the importance of stability in public finances for business investment and growth. He acknowledges that difficult decisions were necessary to stabilise inherited economic challenges but highlights measures such as doubling the employment allowance, increasing small employers’ compensation rate, and freezing the small business multiplier among others. The Government aims to provide a supportive environment through infrastructure, reforms, and investment.
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About Westminster Hall Debates
Westminster Hall debates are a chance for MPs to raise important issues affecting their constituents and get a response from a government minister. Unlike Prime Minister's Questions, these debates are more in-depth and collaborative. The MP who secured the debate speaks first, other MPs can contribute, and a minister responds with the government's position.