UK VAT threshold review 2026: service business checklist

The Treasury signalled that the Spring Budget 2026 will lift the VAT registration threshold and tighten cash-accounting eligibility. If you’re a solo or 5-person crew hovering near £90K–£100K turnover, use this plan to avoid surprise VAT bills and keep Toolfy data clean.

1. Key proposals on the table

• Registration threshold likely rising from £90K to ~£95K (indexed to inflation). De-registration threshold would follow at £93K.
• Cash accounting scheme (CAS) turnover cap may climb from £1.35M to £1.5M, but HMRC will demand better evidence of payment dates.
• Digital links: Making Tax Digital Phase 2 expects API-level exports; spreadsheets without audit trails won’t cut it.

Details will finalize in March 2026, but micro trades should prep now.

2. Use Toolfy to monitor turnover limits

1. Revenue alert: create a dashboard widget showing “Trailing 12-month revenue” sourced from Toolfy invoices. Set alert at £88K so you have 6–8 weeks warning.
2. Lead tagging: mark quoted-but-not-booked jobs separately so you know what happens if even half of them convert.
3. Scenario export: download the Revenue by month report quarterly and run two versions (with/without pending contracts) so you can decide whether to slow bookings or register early.

3. Decide whether to register early or hold back

• Register early if: you want to reclaim VAT on vans/tools, most customers can reclaim VAT, or growth plans push you well past £100K.
• Hold off if: you serve consumers who can’t reclaim VAT and your margin depends on staying below threshold.
• Use Toolfy price lists to model VAT-inclusive vs VAT-exclusive pricing, and store both versions in Documents so quoting stays consistent whichever path you pick.

4. Prepare bookkeeping for digital evidence

• Payment timestamps: when you collect via Toolfy Payments, export payout CSVs weekly and store them in /Finance/2026/VAT so you can prove receipt dates for the cash scheme.
• Expense receipts: upload VAT invoices (fuel, parts) into Toolfy job attachments or your accounting system, tagging supplier + VAT amount.
• MTD-ready exports: schedule a monthly export (CSV) of invoices + payments so your accountant can feed HMRC APIs without manual edits.

5. Communications for customers

• Draft two email templates now:
  1. “We’re registering for VAT on [date] — here’s what changes.”
  2. “We remain below the VAT threshold — pricing unchanged.”
• Store them in Toolfy Documents → Templates so you can trigger reminders from the CRM when the Budget lands.

6. Week-by-week prep timeline

1. This week: turn on the turnover alert, backfill revenue data for the last 12 months, and confirm accountant contact.
2. Within 30 days: organise expenses + payouts in Toolfy folders, decide whether cash accounting or flat-rate suits you, and update quote templates with dual pricing.
3. Budget week: watch the Chancellor’s announcement, then act within 14 days (register or re-price) using Toolfy reminders to notify customers.

Need the alert template or VAT-ready export script? Email support@toolfy.io and we’ll drop it into your workspace once the final thresholds publish.