e-invoicing in the UK and other VAT announcements in the UK Budget

The UK Government has now announced and published the budget for the following year. The budget also includes a number of intended policies including some related to VAT.

We have outlined below the main points that we believe are important:

e-invoicing

E-invoicing will be introduced from April 2029 for all VAT invoices. A road map and further details should be published in 2026. In January 2026, the government intends on starting a collaboration with stakeholders to start work on design and development of the UK’s e-invoicing regime.

The announcement follows a consultation launched in July 2025, the result of which has been published on 26 November 2026 (please see here) . We expect at least some of the points discussed in this consultation to be incorporated in the roadmap and legislation.

Customs duty on low value imports

The government will be removing the customs duty relief on goods imported into the UK valued at £135 or less from March 2029 the latest. Such goods are currently not subject to customs duty which, according to the Government, leads to unfair competition between high street businesses and online retailers based abroad.

However, the low value and the high number of parcels that will need to be processed and duties applied will be challenging for the current customs system. Therefore, the Government intends to implement a new set of customs arrangements for these goods.

The EU has already announced it will remove the customs duty relief for parcels with a value of less than EUR 150 from 1 January 2026. It now seems the UK will follow the growing trend of fully taxing small value parcels imported into the country.

Removal of TOMS from taxi fares

In a decision from March 2025 the Upper Tribunal had decided companies that Bolt, a company operating a ride hailing app was entitled to use the Tour Operators Margin Scheme (TOMS) on the fees charged to customers. The decision meant that other businesses operating in a similar way (e.g. Uber) could also apply this regime at least in the London area.

The Government now wants to amend the VAT legislation and remove the ability of ride hailing app companies to use TOMS on taxi fares. No further details have been provided on how this will be achieved.

Cross border VAT grouping rules

The government has announced it will clarify the rules relating to operating cross border VAT grouping and essentially revert to the UK’s previous position. This will be done with effect from 26 November 2025. A Revenue and Customs Brief on this matter has already been published (see here). For context, a decision from the European Court of Justice (C-7/13 Skandia) had stated that an overseas branch in Sweden and its head office in the United States were different persons for VAT purposes as the branch had been VAT grouped with other Swedish entities. As a result of this services between the branch and the head office would now be taxable. HMRC had followed this decision but has now decided to reverse to the situation prior to the case.

HMRC also invites any businesses that had followed its old guidance to file error corrections and potentially recover VAT as a result of this.

Other VAT measures in the Budget

• VAT penalties will increase – Penalties applied for late payment of VAT will increase from 1 April 2027. Unfortunately, we do not have further details at this moment on the new level of penalties expected.
• Consultation – A consultation on reforming the VAT treatment of supplies of land for social housing has been proposed.
• Donations – A new VAT relief will be introduced from 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services.