Financial experts and business leaders have urged the Chancellor to scrap any plans to widen the scope of VAT in the upcoming Budget, warning that such a move would “bludgeon UK consumers and businesses”, drive up living costs and damage economic growth.
Reports suggest that Treasury officials are considering extending VAT to services that are currently exempt, including private tuition, financial advice, postal services, burials and cremations, private healthcare, property rentals, and non-profit education or sport. The proposal is believed to be under review as part of efforts to raise additional revenue ahead of next year’s fiscal targets.
While the policy could offer a short-term boost to Treasury finances, critics say it would have far-reaching economic and social consequences. Luke James, Tax Director at Sheffield-based Gravitate Accounting, said removing VAT exemptions would distort consumer behaviour and undermine access to essential services.
“A Budget VAT attack would bludgeon UK consumers and businesses,” he said. “VAT exemptions are key for countless essential services like healthcare, education and housing. Removing them risks adding costs, creating new administrative burdens and sparking a public backlash that far outweighs any fiscal benefit.”
James warned that adding VAT to areas such as private tuition and non-profit sport would make these services less affordable for low-income families and increase pressure on small businesses already grappling with rising costs.
In the financial services sector, experts say applying VAT to investment and advisory services would further widen the UK’s “advice gap”. Antonia Medlicott, Managing Director of Investing Insiders, said: “Around 4.1 million UK adults would like financial advice but haven’t been able to access it. Adding VAT would push professional help even further out of reach and undermine efforts to improve financial resilience.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said taxing financial advice would be “a spectacular own goal”. “If the Chancellor genuinely wants to encourage investment in UK business, taxing advice is the worst possible move,” he said.
Small business leaders echoed similar concerns. Rohit Kohli, Director at The Mortgage Stop, described the potential VAT expansion as “dithering desperation”, arguing that “every new tax grab drives up costs and suppresses growth.”
Philly Ponniah, Chartered Wealth Manager at Philly Financial, warned that the move would be regressive, saying many independent professionals could see already thin profit margins “wiped out” by higher costs and reduced demand.
Uncertainty over VAT reform is also affecting small and medium-sized enterprises (SMEs). Eamonn Prendergast, Chartered Financial Adviser at Palantir Financial Planning, said confusion over whether the VAT threshold will rise or fall is “stalling investment and hiring”.
Meanwhile, Pete Mugleston, Managing Director at onlinemortgageadvisor.co.uk, said that extending VAT to essential services would amount to “a stealth tax on the middle class”, worsening the cost-of-living crisis.
Tony Redondo, Founder of Cosmos Currency Exchange, said the policy would not deliver lasting fiscal benefits: “Tinkering with VAT isn’t a structural fix — it’s a one-time boost at a high economic and political cost. The UK needs a growth plan, not higher VAT.”
