The VAT threshold has remained at £90,000 since April 2024, unchanged in both the Autumn 2024 and Autumn 2025 budgets. However, the calculation resets monthly rather than annually. This rolling calculation means businesses must monitor their turnover continuously, as a single month’s spike can trigger registration requirements unexpectedly. Missing the 30-day registration deadline after crossing the threshold can result in penalties, adding unnecessary financial strain to growing businesses.
For high-growth businesses, a single strong month can push turnover over this threshold well before annual accounts reflect it. The registration clock starts immediately, regardless of whether the founder is aware. This lack of awareness often stems from founders focusing on core operations rather than tax compliance, making it key to have systems or advisors in place to monitor thresholds proactively.
Corporation tax bands: shifting sands
There are currently three corporation tax tiers: 19% for profits at or below £50,000, 25% above £250,000, and marginal relief tapering the rate in between. Founders who built their models around the 19% rate often don’t realize when growth pushes them into marginal relief or the 25% band until year-end filings reveal a larger bill. This oversight can significantly impact cash flow, particularly for businesses reinvesting profits into growth initiatives. Associated companies make this messier still. Run more than one company and the profit thresholds get split between them, which can pull a business into a higher effective rate sooner than a standalone forecast would suggest.
Managing multiple companies adds complexity. Profit thresholds are divided among associated companies, potentially pushing a business into a higher effective rate earlier than expected. Short accounting periods further reduce these thresholds, a detail often missed in early planning.
R&D tax relief: under scrutiny
R&D tax relief remains a key benefit for scaling companies, but HMRC has tightened enforcement. Claims that previously passed now face increased scrutiny. An incorrect claim can have long-term consequences, particularly during due diligence when investors review past filings. Errors in claims can lead to repayments, penalties, and reputational damage, especially if discovered during investor due diligence.
Specialist support can be essential. Firms like Accounts and Legal assist growing companies with forward planning, identifying threshold risks before they become compliance issues.
The cost of neglecting tax planning
Tax obligations can quickly become urgent as growth accelerates. Founders who review tax planning quarterly, rather than waiting until year-end, often avoid the last-minute rush that catches many fast-growing companies off guard. Quarterly reviews allow for adjustments to forecasts and strategies, ensuring tax liabilities are managed alongside growth initiatives. This proactive approach also helps in identifying opportunities for tax efficiency, such as maximizing R&D claims or optimizing corporation tax strategies.
