The Hidden Tax Shock Coming for Therapists
There has been a lot of quiet chatter recently about a possible reduction to the UK VAT threshold.
The current registration threshold stands at £90,000, and at this level most therapists remain unaffected. However, two things are happening simultaneously:
- As part of Making Tax Digital (MTD), HMRC will require digital self-assessment for anyone with qualifying income above £30,000 from 2026, and
- There is increasing speculation that the government will lower the VAT threshold to widen the tax base, potentially to £30,000 or even £20,000.
Given the economic climate and the government’s clear need for additional revenue, this is not an unrealistic scenario.
What would this mean for therapists?
My research shows that the majority of therapists see 15–20 clients per week, at £50–£80 per session. This puts roughly 70–75% of practitioners comfortably above a £30k threshold.
If VAT registration becomes compulsory at that level, many therapists will face a significant operational and financial shock.
Mandatory VAT registration and charging VAT
You would be legally required to register for VAT and charge 20% VAT on your services, then remit this to HMRC.
This immediately increases admin load and forces most practices to adopt proper accounting software (Xero, QuickBooks, FreeAgent, etc.), raising costs.
Quarterly VAT returns
You will need to file VAT returns digitally, with penalties for late filings. This adds to an already heavy administrative workload for solo practitioners.
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A likely 20% increase in session fees
Because therapists are not currently VAT-exempt (unlike doctors, dentists, and other regulated healthcare providers), you would almost certainly need to raise your prices by 20% just to maintain your existing income.
John Levett, CEO of UKCP, has previously stated that they are actively lobbying for an exemption for therapists. Whether this succeeds is uncertain.
Realistically, the government is unlikely to carve out an exemption for such a large group of professionals, especially when that would invite a domino effect of requests from coaches, wellbeing practitioners, and other allied professions.
What options do therapists have?
Bluntly: not many.
- You cannot legally “avoid” VAT if your income exceeds the new threshold.
- Reducing your client load to stay under the threshold is not viable for most.
- Absorbing the VAT cost yourself would massively cut income.
- Passing the VAT on to clients may reduce session frequency, especially during a cost-of-living squeeze.
Practically, the only strategic steps available are:
• Improving retention
A 5–10% improvement in retention can mitigate a lot of revenue loss.
• Streamlining admin
Invest in platforms that reduce administrative friction (scheduling, invoicing, note-taking, summaries, transcription). This frees up time for more clinical work.
• Preparing early
If thresholds drop, the therapists who already have efficient systems in place will cope best.
But let’s be clear:
If the therapists VAT threshold is reduced to £20–30k, most therapists will be pulled into a tax regime they were never designed for, adding pressure to an already stretched and burnout-prone workforce.
What do you think?
If you’re a therapist, how would a 20% VAT requirement affect your practice?
I’m Dr. Sriram Ravichandran, a clinician, academic, and founder who believes technology should make human care more human, not less. I’m building HearMeNow to change that story.
It’s an AI-powered companion that helps therapists manage their practice with ease — summarising sessions, tracking mood trends, organising schedules — so they can return to what matters: being present.