The Budget has set out various changes to the UK VAT regime which will be introduced over the next few months and years. The key ones of these can, at a high level, be summarised as follows and we have explored the changes to the reverse charge mechanism in more detail in this article.  

• 1 November 2026 – VAT will be due at the standard rate of 20% on EV Charging supplied at workplace and/or public charging points.  (This follows the ongoing case taken by ‘Charge My Street’ and effectively means that any benefit from a positive result in this is limited to retrospective savings only) 

• 1 April 2027 – Removal of the international reverse charge relief for supplies from overseas suppliers to non-VAT registered UK businesses. More detail below 

• 1 April 2027 – There will be a new zero-rating for land sold to relevant social housing providers.  We expect further guidance on this to be issued in the coming months and for this to be legislated early next year 

• 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. The HMRC policy paper on this follows previous consultation 

• From 1 April 2029 – E-invoicing: VAT invoices must be issued and received in a prescribed electronic format. An implementation roadmap has been published, and a consultation on digital reporting is now live and runs until 20 January 2027 

• 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). 

It is worth noting that none of these changes have been legislated as yet and hence we expect to see legislation being published imminently.  

International reverse charge VAT changes 

At present, when a UK business buys most business-to-business services from an overseas supplier, the customer accounts for any UK VAT itself. This is the “reverse charge”, and the overseas supplier does not need to register for UK VAT. The value of these services also counts towards the customer’s UK VAT registration threshold.  

A non-registered UK business trading below the UK VAT registration threshold generally pays no UK VAT on those purchases at all.  However, UK businesses which are not yet VAT registered are responsible for monitoring their costs incurred from non-UK suppliers and the VAT liability of these to determine if/when they breach the UK VAT registration threshold as a result (in part or in full) of these costs. 

The government describes this as a loophole that “allows overseas businesses to sell services to some UK businesses without accounting for UK VAT”.  Budget 2026 seeks to close it. 

What is changing? 

The government will legislate in Finance Bill 2026-27 so that the reverse charge applies only where the UK customer is VAT registered.  Where the UK customer is not VAT registered, the overseas supplier will have to charge and account for UK VAT. The change is planned to be effective from 1 April 2027.  

It is unclear yet whether some form of simplified VAT registration option may be available. 

Who is affected? 

• UK businesses trading below the VAT registration threshold 

• Small businesses that buy services from overseas, such as software, advertising, consultancy or design, should expect to be charged 20% UK VAT from 1 April 2027. As they are not VAT registered, they cannot recover it, so their costs will rise 

• Overseas suppliers of services to non-VAT registered businesses in the UK 

• Non-UK businesses that sell services to unregistered UK businesses will become responsible for reporting UK VAT.  This may trigger a need for a UK VAT registration. They will also need to find out whether each UK customer is VAT registered, because that decides whether they charge VAT or the customer applies the reverse charge 

• (UK established and VAT-registered businesses are not affected by this change) 

For example 

A UK consultancy firm is not VAT registered and stays below the registration threshold. It buys £10,000 (plus VAT) a year of business services from a US supplier. 

• Now: the services fall under the reverse charge. While the business stays below the threshold, no UK VAT is payable 

• From April 2027: the supplier charges 20% UK VAT of £2,000, which the business cannot recover. The cost rises to £12,000 

What should you do next? 

• If you are not VAT registered, consider your overseas service suppliers and estimate how much you spend with them each year.  Consider the impact if they may no longer be able to be your provider and/or if they were to charge UK VAT on their supplies 

• If you supply UK customers from overseas, work out how much of your UK income comes from customers who are not VAT registered, and check whether your systems record each customer’s VAT status.  Consider the administrative cost of being required to be UK VAT registered 

• Review contracts and pricing terms to see who bears any VAT that becomes chargeable. 

Next steps 

None of these measures has been legislated yet. Keep an eye out for full details of the exact scope of these measures which will be released over the next few days and months.   

For small UK businesses and/or overseas suppliers of services into the UK, it is sensible to start assessing your potential exposure now. 

If you would like to discuss how these changes may affect your business, please contact our specialist VAT team at VAT@shawgibbs.com .