VAT and the therapy room
Private Practice, September 2026

VAT is usually discussed as an administrative or financial matter. For many small psychotherapy practices, however, it is not experienced as something that sits neatly outside the consulting room. These two reflections are written from either side of the VAT threshold. The first is from a psychotherapist whose practice has crossed the threshold and who has had to face the clinical, relational and financial impact of VAT once it entered the frame. The second is from a psychotherapist who has not yet crossed the threshold, but who is already affected by the prospect of doing so. 

After VAT entered the therapy room 

By Paolo Imbalzano

For a long time, VAT sat outside my thinking about psychotherapy. Like many practitioners in private practice, I understood that there were business responsibilities attached to the work: accounting, record keeping, insurance supervision, professional membership, training, clinical notes, contracts and the ordinary administration that sits around the edges of a therapeutic practice. These things mattered, but they did not feel central to the clinical encounter. VAT felt different once it became real. When my practice crossed the VAT threshold, I had to look again at my fees, my structure and the sustainability of the work. The issue was not simply that a tax liability had appeared. It was that the tax could not be kept neatly outside the therapeutic frame. 

Psychotherapy is not like many other services. A fee is never only a fee. It is part of the agreement that makes the work possible. It sits alongside time, place, frequency, confidentiality, cancellation arrangements, endings and boundaries. Together, these form the frame within which trust can develop, and difficult material can gradually emerge. When VAT entered that frame, it did not feel like a neutral administrative adjustment. It felt more like a bull entering a china shop: a blunt structural force moving through a delicate relational system not designed to absorb that kind of impact. 

The VAT dilemma 

The current VAT system requires businesses to register when taxable turnover exceeds, or is expected to exceed, the registration threshold. The threshold is currently £90,000, with a separate deregistration threshold of £88,000.¹ For counselling and psychotherapy, unlike some other health-related psychological professions, services are not currently exempt simply because they are concerned with mental health. HMRC guidance links exemption to statutory registration for relevant health professionals and specifically states that psychotherapists and other therapists without statutory registers cannot currently exempt their services.² This means that VAT either has to be absorbed by the practitioner or passed on to the client. In many small psychotherapy practices, there is limited input VAT to reclaim, because the core of the work is clinical time, supervision, training and relational labour, rather than goods or large taxable purchases. For a practitioner close to or above the threshold, there is no painless option. 

In my case, even before considering VAT liability from the effective date of registration, absorbing VAT while holding client fees unchanged would not have been a small adjustment. It would have reduced net fee income substantially and pushed the practice back by several years in revenue terms, while my professional and personal cost base had moved in the opposite direction. Supervision, training, insurance, professional memberships, room costs, technology, administration and ordinary living costs had all risen. To absorb VAT entirely would therefore have meant trying to sustain the present practice on a financial model that no longer existed. 

Passing VAT on to clients, however, carried its own consequences. I gave clients two months’ notice of a VAT-related fee increase. The intention was to be transparent, careful and ethical: to avoid suddenness where possible, give people time to think, speak and decide, and allow the change to be discussed within the therapeutic relationship. I expected some reductions in frequency and some endings, but I had not anticipated the scale or speed of what followed. 

Within two weeks of announcing the increase, around 22% of clients reduced their attendance from weekly to fortnightly sessions. Over the following two months, around 31% of my original caseload had ended therapy, whether immediately or as the notice period unfolded. A small number later moved back from fortnightly to weekly sessions, and new clients equivalent to around 15% of the original caseload joined at the revised fee level. Even so, this did not reverse the overall contraction. By the time the dust had settled, around two and a half months after the VAT announcement, weekly session volume had contracted by over 20%. 

There was further irony. The contraction in weekly work meant that projected annual income had quickly fallen back below the VAT registration threshold. Yet, once registered, my practice remained within the VAT system unless and until it could meet the separate deregistration test, currently £88,000.¹ Because VAT registration is assessed against past rolling 12-month turnover, I had to continue carrying the additional tax burden while the practice was already generating less revenue. The very impact of VAT had helped push the practice below the level at which registration had first been triggered, while the consequences of registration continued. 

The emotional cost of VAT 

Behind these figures was an intense and, at times, overwhelming period of stress. Alongside continuing to see clients, I had to introduce VAT systems and processes, review the previous year’s expenses to identify what VAT might be reclaimable, liaise with my accountant, update invoices and records, and understand the practical implications of registration. At the same time, I was carrying the clinical fallout of the fee change in the room: disappointment, anger, anxiety, withdrawal, negotiation, rupture and endings. 

The change also seemed to trigger various enactments within the therapeutic work. Some clients could speak directly about what the fee increase meant to them. Others seemed to communicate something more implicitly, through reduced contact, hesitation, cancellation, or stopping therapy altogether. I was trying to remain clinically available while also feeling personally distressed by the scale of what was unfolding. 

There was also the pressing question of how to pay the accrued VAT liability from the effective date of registration. That worry sat in the background while I was trying to respond ethically, communicate clearly, update the business infrastructure, and hold the emotional consequences of the change. It felt less like an administrative adjustment and more like a destabilising event across the whole practice. These figures are not research data. They are the experience of one small practice. But they show how quickly a structural change can become a clinical event.

How VAT reshaped my practice 

There were also secondary consequences. To stabilise my practice after the loss of income, and to account for VAT liability from the effective date of registration, I later had to increase my base fees by a further 7%. I also stopped taking new insurance-funded clients. In practice, the insurers I worked with did not recognise or reimburse the VAT element, which meant that insurer-funded work would effectively be paid at a lower rate than privately funded work, even when the clinical work was the same. Continuing in that way would have meant either absorbing the VAT on insurance-funded work or operating with a two-tier fee structure that did not feel clinically or ethically coherent. 

Beyond this, I had to spend significant time on a complete overhaul of my website structure and content. Some of that work was already needed, but it became urgent once my practice had to reposition itself in response to VAT. I had to clarify the nature of the work, update fee information, revise directory profiles, and communicate the change in a way that was transparent without becoming defensive. 

This was unpaid labour, but it was not separate from the clinical frame. The way a practice presents its fees, value and structure affects the expectations clients bring into the work. In effect, VAT pushed the practice towards a more explicitly specialised and higher-fee position, not because that was the clinical aim, but because the business model had to absorb the shock. That shift also affected the kind of enquiries my practice began to attract. As my practice became more explicitly positioned around specialised trauma-informed psychotherapy, the enquiries that came in were often more complex, involving developmental trauma, dissociation, relational injury and nervous system dysregulation. 

This work is meaningful and clinically appropriate for my practice, but it requires careful pacing, supervision and emotional capacity. It cannot simply be scaled by increasing the number of clients. Even if my practice is financially stabilised at a higher fee level, I may not be able to hold the same number of clients as before. The work has become more expensive to provide and more clinically demanding to sustain. 

The cost of continuing 

For clients, the first impact was financial. Some simply could not continue at the same frequency. Others could continue only by reducing sessions. For those already stretching to pay privately, a VAT-related increase was not marginal. Across a month of weekly therapy, it could feel close to the cost of an additional session. 

The following examples are composites, drawn from patterns across my practice rather than from identifiable clients. One client described the decision in starkly practical terms: therapy still mattered, but the household budget no longer allowed for weekly work. Another could continue only by moving to fortnightly sessions, while acknowledging that this was not what felt clinically most supportive. These were not decisions about whether therapy had value. They were decisions about what could be afforded. 

The second impact was relational. Conversations about fees are rarely neutral in psychotherapy. They can touch questions of value, dependency, resentment, shame, autonomy, need, entitlement, gratitude, anger and loss. For some clients, the fee increase could be talked about openly and worked with. For others, it entered the relationship more quietly. Something changed, but the meaning of that change was harder to speak. 

In some sessions, the fee change became the visible subject. In others, it seemed to hover in the background. A client might say they understood the reason for the increase, while their tone, hesitation or subsequent withdrawal suggested that something more painful had also been touched: perhaps a feeling of being priced out, becoming a burden, or having to choose between need and self-protection. 

The third impact was clinical. Weekly psychotherapy is not merely a scheduling preference. For many clients, especially those working with trauma, dissociation, shutdown, emotional dysregulation, attachment injury or longstanding relational difficulty, weekly rhythm provides part of the holding structure. It supports continuity. It helps the work remain alive between sessions. It creates enough repetition and dependability for deeper material to emerge without overwhelming the client. When weekly work becomes fortnightly, therapy does not necessarily fail, but the clinical conditions change. There may be less continuity, less immediacy, and less capacity to stay with emerging material. 

For some clients, fortnightly work may be appropriate. For others, especially where the work has only recently begun to deepen, it may be a compromise shaped by affordability rather than clinical need. With longer gaps between sessions, more of the work may be spent re-establishing contact, catching up with intervening events, or stabilising what has been stirred up, leaving less room for the slower work of integration. The therapy may continue, but its rhythm has changed. 

The hardest part was seeing that the impact was not evenly distributed. Clients with more financial capacity could usually continue. Clients with more emotional and relational capacity could often talk through the change. Clients with less financial flexibility, less trust in the therapeutic relationship, or more fragile regulation were more likely to reduce, pause or stop. This is one of the ways VAT entered the therapy room. It did not simply increase a price. It altered who could remain in the work and under what conditions. 

Some of the most painful endings were not dramatic. They were quiet. A client would say they needed to think about it. A session would be cancelled. Contact would reduce. In some cases, the client did not feel able to have a conversation about it and contact quietly stopped. The work stopped before it had reached a natural ending. 

In psychotherapy, endings matter. Planned endings can consolidate the work. They allow reflection, grief, gratitude, disappointment, integration and separation to be thought about together. Premature endings are different. They may repeat earlier experiences of interruption, loss, abandonment, or having to withdraw before something has been fully understood. Of course, clients have the right to make financial decisions. Therapy must never become a pressure to continue at any cost. But it is important to recognise that a VAT-related fee increase does not land in an emotionally neutral space. It lands inside relationships that may already be working with vulnerability, trust, fear, need and dependency. 

More than a business tax 

There is also a wider contradiction. Private psychotherapy is often paid for by clients who are already reducing pressure on overstretched public services. Many pay privately because they cannot wait, because they need a particular kind of work, because previous short-term provision has not been enough, or because their difficulties require continuity and depth. Treating this care as a taxable consumer service sits uneasily with the reality of what psychotherapy is often holding. 

Professional bodies have also identified this as an anomaly. UKCP states that psychotherapy, psychotherapeutic counselling and counselling are not currently VAT exempt, unlike some other health services.³ BACP has also campaigned for VAT exemption for counselling and psychotherapy for many years, repeatedly raising the issue with Government through consultation responses, Budget and Spending Review submissions, and wider policy engagement.⁴,⁵ The Partnership of Counselling and Psychotherapy Bodies has recently argued that extending VAT exemption would improve affordability, improve access and help reduce pressure on NHS waiting lists.⁶ policy engagement.⁴,⁵ The Partnership of Counselling and Psychotherapy Bodies has recently argued that extending VAT exemption would improve affordability, improve access and help reduce pressure on NHS waiting lists.⁶

Clients do not usually come to therapy thinking in categories of statutory registration and VAT liability. They come because they are suffering, struggling, stuck, frightened, grieving, overwhelmed, isolated, or trying to change patterns that may have shaped their lives for years. From their perspective, the difference between one form of psychological care being treated as exempt healthcare and another being treated as taxable supply can feel arbitrary.

For practitioners, the current position creates a troubling incentive: stay small, reduce available hours, raise fees, or absorb a financial hit. None of these options increases access. None supports continuity. None helps meet the growing need for psychological care. 

There is a phrase I kept returning to: VAT had entered the room. It entered through invoices and fee notices, but also through hesitation, anxiety, rupture, negotiation, disappointment and loss. It entered through the question of whether clients could continue. It entered through the therapist’s own concern about viability, fairness and responsibility. A tax designed for economic activity becomes something else when applied to psychotherapy. It shapes continuity, access, trust and clinical possibility. In that sense, VAT is not simply a tax on therapy fees. It can become a tax on stability, psychological care and the fragile conditions that allow therapeutic work to continue.

Before VAT enters the therapy room 

By Trish Kill

A recent conversation with a tradesperson – anonymised and altered here as Jack – brought the VAT threshold into focus for me. Jack explained that he had a VAT issue. He had taken on an apprentice, which meant he could do more work. But in reaching the £90,000 rolling annual VAT threshold, he would need to add VAT to my bill.¹ 

Over a cup of tea, Jack aired his frustration. As he saw it, he might have been better off not expanding and staying a one-man band instead. I had come across this issue before with various small businesses I had used over the years. I felt concern for Jack, and for his new apprentice. Jack is reliable and trustworthy. He knows the quirks of my house. I am a loyal sort, so I paid. A month later, through a conversation with my psychotherapy colleague Paolo, I realised how Jack’s issue of reaching the VAT threshold was closer to my own profession than was comfortable. 

As a part-time psychotherapist, I thought of VAT as something that sat largely out of sight and outside my client relationships. Like many practitioners, I carried the familiar responsibilities of an ethical, professional private practice: keeping GDPR compliant, staying up to date with professional development, managing invoices for organisational clients and private health providers. These tasks were not insignificant, but they felt known, relevant and mutually beneficial to me and my clients, and part of professional life. All things tax, however, given that my income includes a mix of practice income and other sources, I had rather gratefully outsourced to my accountant. 

Through Paolo’s experience, I became aware of what happens when a psychotherapy practice crosses the VAT threshold. Suddenly, VAT was no longer an abstract business matter for Jack and others working outside the healthcare professions. It became something with a looming, if still potential, threat to my clinical work. 

I have intentionally kept my practice scaled back, which is possible for me because I already had financial security from a previous corporate career that funded my training. I know this is not possible for everyone, but my ability to work part time is precisely what troubles me now. The VAT threshold affects all of us standing before it, constantly calculating. Like Jack and Paolo, I am left wondering: is growth viable? Are more client hours sustainable? Does responding to increasing demand carry consequences that are disproportionate for a small, ethical practice like mine? 

A tax on care

There is significant demand for therapy in the UK. BACP’s 2026 Public Perceptions Survey found that 37% of UK adults had sought help from a counsellor or psychotherapist at some point in their lives.⁷ I feel this demand directly, and I know people are looking for help. Yet I also feel an uncomfortable pressure. If I grow too far, my practice may be destabilised; if I stay smaller, I am limiting access for people who may need me. 

It is not just the additional administrative headache. Let us not pretend that staying on top of paperwork for private health insurers, notes and CPD is not at times arduous. The deeper issue for me is that VAT acts as a structural barrier, discouraging me from growing my practice. As a service professional, I can claim very little VAT. Much of what makes my clinical work good – supervision, training and therapy – is often provided by peers who are not generally VAT registered. So, for me, VAT does not feel like a neutral business tax. It feels like a penalty on the essential therapeutic relationships I hold with my clients and an additional financial worry. As a former therapy client myself, I know this. For counselling or psychotherapy students for whom therapy and supervision are compulsory, it is a tax on education. As I contemplate a possible VAT-related fee change, it disturbs me. I am concerned at the level of disruption that lies ahead, especially for clients already dealing with instability or trauma. It is a quiet cruelty, inviting me to become a tax collector, which feels exploitative.

Diversity, fairness and access 

I see serious implications for diversity here too. Our training is long, expensive and often self-funded, requiring huge financial resilience. If growing a practice carries the risk of VAT liability, then the profession becomes increasingly inaccessible for people from aspects of life without the advantage of existing financial security. I feel strongly that clients need access to therapists from such diverse backgrounds. Representation is not just a nice-to-have; it affects trust and understanding. 

The current VAT rule also creates an uncomfortable inconsistency: some psychological therapies are exempt because they are delivered by statutorily regulated health professionals, while counselling and psychotherapy are not treated in the same way.^2,3,6 To clients, this is baffling. They want skilled psychological care from a trained practitioner. It is clinically difficult to explain why one form of psychological care is treated as healthcare and another becomes a taxable service. While Jack the tradesperson can claim back VAT on materials, that option is mostly unavailable to me. I sit outside the VAT ecosystem when purchasing many of the essential services that support my clinical work, such as supervision. 

The cost of growth 

This cliff-edge VAT threshold is a recognised problem for small businesses more generally. The Office of Tax Simplification has noted that the VAT threshold can discourage businesses from expanding, and the Institute for Fiscal Studies has described how, once the threshold is crossed, VAT is levied on all sales rather than only on the amount above the threshold.⁸,⁹ It was this that was hurting Paolo, making him wonder if growth was worth it. For an already generous therapy community, the problem is just as serious. We often offer reduced fees and absorb costs, but goodwill cannot fix this structural anomaly. As for Jack, he is left wondering whether he should let his apprentice go. 

The emotional cost is unsettling. I mind that the trust built in therapy can be undermined by a tax rule. Long before VAT appears on my invoices, it has already entered my thinking. Will I do as Jack seems to be considering, and shift my focus towards working with organisations that can absorb the extra cost and reclaim VAT within their own systems? What happens to those who cannot? And would that simply make me part of the problem, joining in with the unfairness of the system? 

I feel its weight. It is there in my self-limitation as I plan my practice’s future. I do not believe VAT was meant to be clinically consequential for our field, but that is what it has become. 

Shared conclusion 

These two reflections describe different moments in the same structural problem. For one practitioner, VAT has already entered the therapy room through fee increases, disrupted continuity, reduced session frequency and premature endings. For the other, VAT has entered before registration, shaping decisions about growth, workload, access and professional sustainability. 

This is the problem for small psychotherapy practices. VAT is not experienced only as an accounting matter, it affects the clinical frame, the viability of practice, the affordability of care, and the range of practitioners who can enter and remain in the profession. The anomaly is therefore not merely technical. It has consequences for clients, practitioners and the wider mental health system. 

If private psychotherapy helps reduce pressure on overstretched public services, supports people in psychological distress, and provides skilled care for trauma, grief, anxiety, relational difficulty and emotional suffering, then it is difficult to justify treating it as a taxable luxury. The question is not whether psychotherapists should be exempt from ordinary responsibilities. The question is whether the current VAT position undermines the access, continuity and diversity that mental health policy should be trying to protect.