Tax system hinders small business growth Dan Neidle, the founder of Tax Policy Associates, says the UK's tax system poses a major obstacle to small business growth, particularly due to the VAT threshold. He highlights that once a business' turnover reaches £85,000, they must charge VAT at 20% on all sales, arguing that this creates a significant price disadvantage compared to competitors. Many businesses, he says, intentionally limit their growth to avoid this "VAT trap," resulting in a bulge of businesses just below the threshold. Mr Neidle says that while increasing the threshold is an option, it would be costly and exacerbate the problem. Instead, the UK should align with other OECD countries and reduce the threshold to £30,000. He suggests such a change should be phased in over time and any revenue generated should be used to lower the VAT rate.