Budget 2026: What are the key VAT changes?

Budget 2026: What are the key VAT changes?

The Autumn Budget was delivered on 28 October 2026 and while there weren’t any headline changes to the main VAT rates or registration threshold, there were still a number of announcements that businesses should have on their radar.

Some changes are coming relatively soon, while others are a few years away. From e-invoicing and online marketplaces to property, overseas services and EV charging, we’ve rounded up the main VAT points below.

E-invoicing is on its way

We already knew mandatory e-invoicing was coming, but we now have a clearer idea of how the Government intends to get there.

From 1 April 2029, businesses will be required to issue and receive VAT invoices electronically, using a standardised digital framework known as PEPPOL.

PEPPOL will form the core framework for the new system, although there is still plenty of detail to come before businesses need to make any changes.

The Government is also looking at whether information generated through e-invoicing could eventually be reported digitally to HMRC. However, no decision has yet been made on introducing this additional reporting requirement.

So this is one to keep on the radar.

Selling through an online marketplace?

From 1 October 2027, online marketplaces will take on greater responsibility for VAT on sales made through their platforms.

For relevant sales by UK VAT-registered businesses, the marketplace will become responsible for accounting for the VAT. The rules will also extend to non-VAT-registered UK businesses where sales through an individual marketplace exceed £90,000 a year.

Second-hand goods and business-to-business sales will be excluded.

This could be a significant change for businesses that rely heavily on online marketplaces, so sellers will need to understand how the new rules affect them well ahead of October 2027.

Buying services from overseas

There is an important change coming to the VAT reverse charge too.

From April 2027, the reverse charge for services bought from overseas will be restricted to UK businesses that are VAT registered.

Where a UK business customer isn’t VAT registered, the overseas supplier will instead be required to charge and account for UK VAT.

There is still more detail needed around exactly how the new rules will work in practice, so this is another area we’ll be keeping an eye on.

Changes for taxi and private hire operators

From 2 January 2028, larger taxi and private hire vehicle operators will face a change in how VAT applies to passenger fares.

Where the new rules apply, the operator, rather than the individual driver, will be treated as making the supply and will therefore charge VAT on the full passenger fare.

The rules will only apply above a certain level of annual fare turnover. The Government’s current lead option is £50 million, but the final threshold and details are still subject to consultation.

Could TOMS be changing?

Potentially, but not just yet.

The Government has launched a review of the VAT treatment of travel services, including the Tour Operators’ Margin Scheme (TOMS).

It will look at whether the scheme could be simplified or improved and whether it is still fit for purpose. The review will even consider what would happen if TOMS were withdrawn altogether.

For now, there is no immediate change to the rules. The call for evidence runs until 31 January 2027.

Good news for social housing developments

There was also an important VAT announcement for property developers and registered providers of social housing.

From 1 April 2027, a new zero rate will apply when land is sold to a registered provider of social housing.

Under the current rules, transactions can sometimes need to wait until construction has reached the “golden brick” stage before an existing zero rate can apply. The new rules should allow qualifying land to transfer earlier in the development process.

HMRC is expected to publish further guidance before the change takes effect.

Domestic electricity VAT cut extended

The temporary 0% VAT rate on domestic electricity has been extended.

The rate had already been reduced from 5% to 0% from 1 October 2026 until 31 March 2027. The Budget extends the zero rate until 31 July 2027.

EV charging stays at 20%

The Government is also clearing up the position on public and workplace electric vehicle charging.

From 1 November 2026, electricity supplied through publicly accessible and workplace EV charging points will be subject to the standard 20% VAT rate.

The legislation follows a recent tribunal decision which found that public EV charging could qualify for the 5% reduced rate in certain circumstances. HMRC disagreed with that decision, and the new legislation will confirm the 20% treatment going forward.

Direct Debits becoming mandatory for VAT

And finally, another change to add to the diary for 2029.

From April 2029, businesses will be required to have a Direct Debit instruction in place with HMRC for their VAT payments.

It’s still a long way off, but worth being aware of alongside the move to mandatory e-invoicing in the same year.

What does it all mean?

There wasn’t one huge VAT announcement in this Budget. Instead, we’ve got a number of changes arriving over the next few years, some of which could have quite a significant impact depending on the type of business you run.

The dates to particularly keep an eye on are:

• 1 November 2026 – 20% VAT confirmed for public and workplace EV charging
• April 2027 – changes to the reverse charge for overseas services
• 1 April 2027 – new zero rate for land sold to registered providers of social housing
• 1 October 2027 – new rules for online marketplaces
• 2 January 2028 – changes for larger taxi and private hire operators
• April 2029 – mandatory e-invoicing and Direct Debit requirements.

As always, VAT isn’t one-size-fits-all, and how these changes affect a business will depend on its individual circumstances.

If you’re unsure whether any of the Budget VAT announcements will affect your business, please get in touch with our VAT team and we’ll be happy to help.