UK Budget 2026: Key VAT Changes for E-Invoicing, Marketplaces and Cross-Border Services

The UK Government's Budget 2026 includes several significant VAT measures. The four most notable are mandatory e-invoicing from April 2029, the extension of online marketplace liability to UK sellers, a restriction of the reverse charge on cross-border services, and mandatory direct debit for VAT return liabilities. These are announced measures, and their legislative implementation is still pending.

When Will E-Invoicing Become Mandatory in the UK?

From 1 April 2029, VAT invoices will have to be issued in a structured electronic format. The requirement will apply to business-to-business (B2B) and business-to-government (B2G) transactions across all VAT-registered businesses. The government has published an implementation roadmap and will provide full details of the policy and technical design by April 2028. It has also published a consultation on potential future uses of the structured invoice data generated through e-invoicing.

For full details, see our complete guide to e-invoicing in the UK.

What Changes for UK Sellers on Online Marketplaces?

In 2021, the UK introduced reforms to ensure that overseas sellers on online marketplaces pay the VAT they owe. From 1 October 2027, the VAT online marketplace liability (OMPL) rules will be extended to UK businesses. Online marketplaces will have to collect and remit VAT on business-to-consumer (B2C) sales made through their platforms where the seller is:

• a UK VAT-registered business, or
• any other UK business with annual sales of more than £90,000 through that platform.

The new rules will not apply to non-business (i.e. personal) sales, second-hand goods or business-to-business transactions.

For more detail, see our guide to UK VAT rules for e-commerce.

How Will the Reverse Charge on Cross-Border Services Change?

From 1 April 2027, the reverse charge on cross-border supplies of services will be restricted to VAT-registered UK customers. Where an overseas provider supplies services to a non-VAT-registered UK business, it will have to charge and account for UK VAT and, where applicable, register for VAT in the UK. The existing UK reverse charge arrangements will continue to apply where the UK customer is VAT-registered.

The measure will be introduced through legislation in Finance Bill 2026-27. Neither the Budget nor the policy costings document specifies which services are affected or whether a specific registration threshold will apply to these providers.

Will Paying VAT by Direct Debit Become Mandatory?

From 1 April 2029, VAT taxpayers who do not currently pay by direct debit will have to set up a direct debit instruction. They will still be able to use other payment methods before a specified cut-off date. The direct debit will be used to collect any VAT return liabilities that remain unpaid by the due date.

In addition, from July 2029, HMRC will have a new power to recover lower-value tax debts directly from bank accounts through monthly instalments. It will apply to taxpayers who can afford to pay but repeatedly fail to do so, starting with VAT and PAYE debts, and covers debts of up to £10,000 for companies and up to £5,000 for individuals.

How Can Marosa by Wolters Kluwer Help You?

Marosa by Wolters Kluwer can help you assess how the VAT measures in Budget 2026 affect your business, prepare your systems for mandatory e-invoicing and Peppol, review your UK VAT registration position if you supply services to non-VAT-registered UK businesses, and manage your VAT compliance through VATify by Wolters Kluwer.

For more on UK VAT rules, see our UK VAT manual, or speak to one of our VAT experts.