VAT in the UK 2027: Threshold, Rates, Penalties and What Changes
VAT 2027 at a glance
Registration threshold stays at £90,000 of taxable turnover in any rolling 12 months; deregistration stays at £88,000.
Rates stay at 20% standard, 5% reduced and 0% zero rate.
1 April 2027: late payment penalties rise from 3% to 4% at day 15 and again at day 30. Energy-saving installations go back from 0% to 5%.
1 July 2027: the 0% rate on household electricity ends.
October 2027: online marketplaces start collecting VAT on sales by UK businesses.
1 April 2029: e-invoicing becomes mandatory for VAT invoices; technical details are due by April 2028.
Threshold and rates: no change in 2027
The Budget on 28 October 2026 left the VAT registration threshold at £90,000, where it has been since April 2024, and kept the deregistration threshold at £88,000. The standard rate stays at 20%, the reduced rate at 5%.
The threshold still works on a rolling 12-month basis, not the tax year. At the end of each month you add up taxable turnover for the previous 12 months; if it is over £90,000, you must tell HMRC within 30 days. If you expect to pass £90,000 in the next 30 days alone, you register straight away. Our guide to VAT registration and the £90,000 threshold walks through both tests and the registration process.
Frozen thresholds pull more businesses into VAT every year because prices rise while the limit does not. If your turnover is above about £80,000, check the rolling total every month and decide in advance whether you would register voluntarily, raise prices or hold back growth.
The 2027 calendar: what changes and when
1 April 2027: the temporary 0% VAT on energy-saving materials (insulation, heat pumps, solar panels, batteries, heating controls) ends and the rate returns to 5%. Installations completed by 31 March 2027 keep the zero rate.
April 2027: overseas suppliers selling services to UK businesses that are not VAT registered will have to charge UK VAT. Today the reverse charge covers these sales; from April it applies only to VAT-registered UK customers. If you are below the threshold and buy software or online services from abroad, expect 20% to appear on those invoices.
1 July 2027: the 0% VAT on household electricity in Great Britain, introduced on 1 October 2026, ends and the 5% rate returns.
October 2027: online marketplaces will collect VAT on sales made through them by UK VAT-registered sellers and by other UK businesses selling more than £90,000 a year on a single platform. The final threshold and start date will be set in secondary legislation during 2027.
Two dates to put in the diary now: 31 March 2027 for any energy-saving work you want at 0% VAT, and 1 April 2027 for the higher late payment penalties.
Late payment penalties go up from 1 April 2027
The points system for late returns stays: one point per late return and a £200 penalty once you reach the threshold (4 points for quarterly filers, 2 for annual, 5 for monthly), then £200 for every further late return.
Late payment penalties get more expensive. Until 31 March 2027 you pay 3% of the VAT outstanding at day 15 and a further 3% of what is still unpaid at day 30. From 1 April 2027 both percentages rise to 4%. The second penalty, a daily charge at 10% a year from day 31, does not change. Late payment interest runs on top from the first day at the Bank of England base rate plus 4%, currently 7.75%.
A Time to Pay arrangement agreed with HMRC before day 15 stops the late payment penalties, though interest still runs. If you cannot pay a return, contact HMRC before the deadline rather than after. Our guide on how to file and pay your VAT return explains the deadlines and payment methods.
E-invoicing: the roadmap is out, the date is 2029
The Budget confirmed that from 1 April 2029 VAT invoices must be issued in a prescribed electronic format, and published an implementation roadmap. Full policy and technical details will follow by April 2028. The UK has chosen the Peppol network, so an emailed PDF will not count as an e-invoice. Nothing is mandatory in 2027, but if you are choosing or replacing invoicing software this year, Peppol capability belongs on the checklist.
Not sure what an e-invoice is? Read E-invoicing in the UK: what it is and how it works.
FAQ:
1. What is the VAT registration threshold in 2027?
£90,000 of taxable turnover in any rolling 12-month period, unchanged since April 2024. The deregistration threshold is £88,000.
2. Are VAT rates changing in 2027?
The main rates stay at 20%, 5% and 0%. Two temporary zero rates end: energy-saving materials return to 5% on 1 April 2027 and household electricity returns to 5% on 1 July 2027.
3. How are VAT late payment penalties changing in April 2027?
From 1 April 2027 the first penalty rises from 3% to 4% of the VAT outstanding at day 15, and the additional penalty at day 30 rises from 3% to 4%. The 10% a year daily penalty from day 31 and the points system for late returns stay the same.
4. When does e-invoicing become mandatory in the UK?
From 1 April 2029 for VAT invoices. The government published the roadmap at the 2026 Budget and will release the full technical details by April 2028.
5. What changes for online marketplace sellers in 2027?
From October 2027 marketplaces will collect VAT on sales by UK VAT-registered sellers and by UK businesses selling more than £90,000 a year through one platform. Details will be set in regulations during 2027.
Conclusion:
For 2027 the VAT headline is continuity: £90,000 threshold, 20% standard rate, quarterly returns through Making Tax Digital. The practical changes sit around the edges and most of them cost money if you miss them. Late payment penalties rise by a third from 1 April 2027, energy-saving installs and household electricity lose their zero rates during the year, marketplace sellers see VAT collected at source from October 2027, and the 2029 e-invoicing date is now fixed. Check your rolling turnover monthly, pay VAT by Direct Debit so day 15 never arrives, and keep the April 2028 technical release for e-invoicing on your radar.
