On previous versions of VyOS (at least on 1.2.7) the open files limit of the Squid web proxy service was set in the init.d/squid3 script to ulimit -n 65535. The new versions of VyOS don't set this limit in the systemd unit file which gives the web proxy service a limit of 1024 which is very low for even a small number of users.

This can be fixed by adding the LimitNOFILE=65535 to the squid systemd unit file override and restarting squid.