Budget 2026 – VAT changes announced

Yesterday’s Budget announced a number of VAT changes that are due to come into place at various dates from November this year until 2029. The big change is the removal of the international reverse charge relief for supplies from overseas suppliers to non-VAT registered UK businesses.

Yesterday’s Budget announced a number of VAT changes that are due to come into place at various dates from November this year until 2029. The big change is the removal of the international reverse charge relief for supplies from overseas suppliers to non-VAT registered UK businesses.

International Reverse Charge changes

Currently when a UK business buys most business to business services from an overseas supplier, the UK business accounts for any UK VAT itself under the Reverse Charge scheme, which means that the overseas supplier does not need to register for UK VAT to make supplies to the UK.

If the UK business is not VAT registered, these reverse charges supplies received count towards the VAT registration threshold, meaning that it can mean that the UK business has to register for VAT sooner that they would based on turnover alone as they need to include and account for the VAT on those services acquired, so they generally do not pay VAT on those supplies.

The Government see this scheme as a loophole that allows some overseas businesses to provide services to the UK without VAT and thus undercut local businesses in the UK providing the same services. The change announced in the Budget therefore seeks to close that loophole.

From 1 April 2027, the reverse charge scheme will only apply if the UK customer is VAT registered, where the UK customer is not VAT registered, even if they are in business, the overseas supplier will have to charge and account for UK VAT.

Small businesses will therefore have increased costs since they will be charged VAT that they cannot recover on these services. Overseas suppliers will become responsible for reporting UK VAT and they will need to obtain information on each customer to determine whether they are VAT registered or not.

Other changes announced

• 1 November 2026 – VAT at the standard rate of 20% will be due on EV Charging supplied at workplace and/or public charging points.
• 1 April 2027 – Introduction of a new zero-rate for land sold to relevant social housing providers. 
• From October 2027 onwards – Online marketplaces will collect VAT on sales by UK VAT-registered sellers, and by other UK businesses with at least £90,000 of annual sales on that platform.
• From 1 April 2029 – E-invoicing: VAT invoices must be issued and received in a prescribed electronic format.
• The temporary zero-rating for VAT on domestic supplies of electricity has also been extended from 31 March 2027 to 30 June 2027 (but not made permanent).

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