UK VAT only. These are HMRC rules for UK businesses.
From April 2027, overseas businesses selling services to UK businesses that are not VAT registered will have to charge UK VAT. The government announced it in Budget 2026 on 28 October 2026. The reverse charge, where the customer accounts for the VAT instead of the supplier, will be kept only for customers that are VAT registered.
This is one of the changes in the Autumn Budget 2026 VAT summary, which lists every VAT measure and its start date.
What changed?
The Budget 2026 document says: "From April 2027, the reverse charge on cross-border supplies of services will be restricted to VAT-registered businesses."
It goes on: "Where overseas providers make supplies of services to non-VAT registered UK businesses, they will be required to account for VAT in the normal way."
The government describes this as closing a loophole that lets overseas businesses sell services to some UK businesses without accounting for UK VAT. The overview of tax legislation and rates says the change will be made in Finance Bill 2026-27 and follows an HMRC call for evidence on VAT and the sharing economy from December 2020.
Who this affects
UK businesses that are not VAT registered and buy services from suppliers based outside the UK. That covers many sole traders and small firms below the £90,000 registration threshold. Typical examples are software subscriptions, online advertising and freelance work bought from overseas.
VAT-registered businesses are not affected. They keep using the reverse charge on services bought from overseas, as now.
What it means for you
Say you run an unregistered business and pay an overseas supplier £100 a month for a service. These are example figures, and we assume the service is one that is charged at the standard rate in the UK.
Monthly price before VAT£100
UK VAT the supplier will add from April 2027£100 × 20% = £20
What you pay each month£100 + £20 = £120
Because you are not VAT registered, you cannot reclaim that £20. It becomes part of your cost. Our VAT calculator works out the VAT on any price.
What to do now
- List the services you buy from overseas. Look at subscriptions, advertising and contractors billed from outside the UK.
- Budget for higher costs from April 2027 if your business is not VAT registered.
- Watch for HMRC guidance. The exact start date and the detail will come with the Finance Bill 2026-27 legislation.
If you are close to the threshold, our VAT registration threshold guide explains when you must register.
What has not changed
- The VAT rates. The Budget kept its commitment of no increase to the headline rate of VAT.
- The registration threshold. It stays at £90,000 for 2027 to 2028.
- VAT-registered businesses. The reverse charge still applies to them.
Source
Budget 2026, HM Treasury, 28 October 2026, under "VAT treatment of cross-border services". Budget 2026: Overview of tax legislation and rates, section 1.59.
Questions
Will overseas suppliers charge my business UK VAT?
From April 2027, yes, if your UK business is not VAT registered and the service is taxable in the UK. If you are VAT registered, you keep using the reverse charge.
When does the change start?
April 2027. The government will legislate for it in Finance Bill 2026-27.
Can I reclaim the VAT an overseas supplier charges me?
Only if you are VAT registered. An unregistered business cannot reclaim VAT, so the VAT becomes part of the cost.
Does this change the VAT registration threshold?
No. The threshold stays at £90,000 for 2027 to 2028.
