VAT changes in Budget 2026: reverse charge, taxis and energy

The headline rate of VAT and the registration threshold are untouched in Budget 2026, but there are more than a dozen VAT measures underneath. The biggest for most practices are the move to e-invoicing in 2029, marketplaces collecting VAT for UK sellers from October 2027 and Direct Debit for VAT payments from April 2029, which have their own posts. This one covers everything else.

Thresholds unchanged

Annex A to the Budget shows the VAT registration threshold at £90,000 and the deregistration threshold at £88,000 from April 2027, the same as from April 2026. The Budget document confirms no increase to the headline rate of VAT.

Reverse charge restricted to VAT-registered customers

From 1 April 2027, the reverse charge on services supplied from overseas will only apply when the UK customer is registered for VAT. Where the UK business customer is not registered, the overseas supplier will have to charge UK VAT and account for it to HMRC.

Under the current rules, an unregistered UK business buying such services pays no VAT, but must add the value of the services to its turnover when testing whether it needs to register. HMRC says the change removes an advantage for unregistered businesses buying from overseas, helps small gig and sharing economy businesses that may not know a platform is based abroad, and lets overseas suppliers decide whether to charge VAT simply by checking for a UK VAT number.

For unregistered clients, overseas services such as software subscriptions or platform fees may cost 20% more if the supplier passes on the VAT. ICAEW says more detail is needed on how overseas suppliers will account for UK VAT and how the change interacts with the registration rules. See our guide to the reverse charge.

Private hire vehicle operators

From 2 January 2028, taxi and private hire journeys supplied through an agent will be treated as supplied by the agent, the operator, rather than the driver, where the operator’s annual fare turnover exceeds a threshold. The operator must then charge VAT on the full fare. The government will consult on the threshold, with £50 million of annual fare turnover as the lead option, so smaller local firms are protected.

Electric vehicle charging

From 1 November 2026, legislation will confirm that electricity supplied through publicly accessible and workplace charging points is standard rated at 20% and is not domestic use for the Climate Change Levy. HMRC has published Revenue and Customs Brief 13 (2026) on the treatment. The measure is aimed at public and workplace charge points.

Energy

• Domestic electricity. The temporary 0% VAT rate on domestic electricity, which started on 1 October 2026, is extended to 1 July 2027. Qualifying supplies that would otherwise be at the 5% reduced rate from 1 April 2027 stay at 0% until then.
• Energy-saving materials. The temporary 0% rate for installing energy-saving materials in homes and charity buildings ends as planned, so the rate returns to 5% from 1 April 2027. Heat batteries are added to the list of qualifying materials from the same date.

Property and housing

From 1 April 2027 a new zero rate will apply to sales of land to registered providers of social housing. ICAEW says this should let housing associations take title earlier, instead of waiting for building work to reach the stage where the existing zero rate applies.

Health

• Medical deputies. From 1 May 2027 the exemption for supplying a deputy for a registered medical practitioner is removed, so these supplies become standard rated. Deputising services remain exempt where they are mainly the provision of medical care.
• Donated medicines. A new zero rate applies to medicines provided free of charge for NHS treatment, early access schemes and clinical trials, with effect from 23 June 2026.
• NHS England. Consequential changes follow the abolition of NHS England, keeping the existing treatment where appropriate.

Other VAT measures

• Tour Operators’ Margin Scheme. A call for evidence on whether TOMS remains fit for purpose, and whether it should be reformed, simplified, made optional or removed, runs from 28 October 2026 to 31 January 2027.
• VAT126 refund claims. An enabling power will allow future powers and safeguards for refund claims by non-business bodies such as local authorities, academies and some charities.
• Deposit return scheme. From the scheme’s launch in October 2027, the Deposit Management Organisation, not individual producers, will account for VAT on unreturned deposits.
• Northern Ireland distance sales. Schedule 9ZA to the VAT Act is amended for distance sales of goods from the EU to consumers in Northern Ireland from 1 January 2027.
• Till fraud. Mandatory software standards for point of sale systems are planned, with a technical consultation in summer 2027. See HMRC compliance changes.

The bigger VAT changes

• VAT e-invoicing from April 2029
• Online marketplaces collecting VAT for UK sellers from October 2027
• Direct Debit for VAT and PAYE from April 2029

Frequently asked questions

Is the VAT registration threshold changing?

No. It stays at £90,000, and the deregistration threshold at £88,000, for 2027-28.

What changes for UK businesses buying services from overseas?

From 1 April 2027 the reverse charge will only apply if the UK business is VAT-registered. If it is not, the overseas supplier must charge UK VAT instead.

What VAT applies to public EV charging?

The standard rate of 20%. Legislation from 1 November 2026 confirms that electricity supplied through publicly accessible and workplace charging points is standard rated.

When does the VAT on energy-saving materials go back to 5%?

From 1 April 2027, when the temporary zero rate introduced in 2022 ends as planned. Heat batteries are added to the list of qualifying materials from the same date.