Introduction
Coming up to 2025, HM Revenue & Customs (HMRC) is introducing several changes to VAT that will affect businesses across the UK. Depending on whether you’re a sole trader, limited company or accountant handling business in your firm’s name, you want to know how the changes will impact your cash flow and your VAT liabilities.
Here we outline the major changes to the VAT in 2025 and offer you some useful recommendations to help you stay compliant.
1. New VAT Registration Threshold
The UK VAT threshold has also remained unchanged at £85,000 for several years. In April 2025, the threshold will rise to £90,000 to offset inflation and to reduce the administrative burden for small businesses.
– What this means for you:
You have to register for VAT if your taxable turnover is greater than £90,000 in any 12-month period that rolls.
• You are eligible to apply for deregistration if your turnover is below £88,000.
• Companies nearing the threshold need to pay close attention to turnover to escape penalties.
Tip: Keep monthly records of sales to know when you’re approaching the limit.
2. VAT Return Deadlines Changes
From 1 July 2025, HMRC will standardise VAT return due dates. Each business in quarterly VAT returns will pay and file one month and seven days after the end of the VAT period.
– Example:
If your VAT period ends 30 September, payment and return should be made by 7 November.
Why this matters:
• Some companies had marginally different dates in special arrangements.
• Failure to use the new dates may incur surcharges.
3. Wider Application for Digital VAT Reporting
In the expanded Making Tax Digital for VAT (MTD) rules from April 2025:
- Companies with any amount of turnover are required to have electronic records.
- You have to submit VAT returns using MTD-compliant software.
Tip: If you are still using spreadsheets in accounting procedures, this is when you should switch to compliant software such as Xero, QuickBooks, or Sage.
4. Flat Rate Scheme Percentage Changes
The Flat Rate Scheme (FRS) simplifies the VAT for small businesses but the proportion in the sector-specific rates is being adjusted. From April 2025:
• Some sectors will have amended flat rates to allow for changes in input tax.
e.g., The flat fee for IT consultants will increase to 15% from 14.5%.
What to do:
✅ Check the current rates for your industry at HMRC’s website.
✅ Verify if the scheme still enjoys a benefit compared to standard VAT accounting.
5. Amended Penalties for Submission After Deadlines
HMRC will start a points-based penalty system for late submission of VAT returns. From January 2025:
• You earn 1 point per late submission.
• After reaching the penalty threshold (usually 4 points), you’re charged a £200 penalty. • Reset to zero at the end of a compliance period. Tip: You must file your return regardless if you owe no VAT to avoid being penalized with points.
6. Import VAT Accounting Changes
Importing businesses in the UK will receive new PVA (Postponed VAT Accounting) guidance. From April 2025: • You need to prominently announce delayed VAT in your monthly VAT return. • A new electronic statement will be produced by HMRC to accompany your returns.
Benefit
PVA continues to help with cash flow by not paying at the border at once.
How to Prepare for VAT Changes in 2025
✅ Review Your Software
Ensure your accounting system is MTD-compatible and ready for the new reporting requirements.
✅ Train Your Team
Educate staff involved in finance about new deadlines and rules.
✅ Reassess Your VAT Schemes
Consider whether the Flat Rate Scheme or standard accounting is best for you.
✅ Talk to Your Accountant
Seek professional advice to avoid surprises and plan ahead.
Conclusion
The 2025 VAT changes are designed to simplify compliance and reflect modern business practices, but they also mean new deadlines and stricter reporting rules. Staying informed and proactive will help you avoid penalties and keep your business running smoothly.
At MZMC Accounting & Digital Services, we help businesses across the UK manage VAT efficiently, comply with regulations, and make sense of changing tax laws.
Need Help Navigating VAT?
Contact us today for a free consultation on how we can support your business through these VAT changes.
[📞 Call Us at +447518-632-447] [📧 Email Us at haseeb@mzmc.co.uk] [📝 Book a Consultation]