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VAT FAQ

Do I need to register for VAT?

You must register once your taxable turnover for any rolling 12-month period goes over £90,000, or you expect it to in the next 30 days. Here is how the threshold works, when to register voluntarily, and what it means for sole traders.

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The short answer: you must register for VAT if your taxable turnover over the last rolling 12 months goes over £90,000, or if you expect to pass £90,000 in the next 30 days on its own. It is a rolling figure, checked every month, not your tax year or accounting year. Under £90,000 you can register voluntarily if it suits your business, but you do not have to.

You go over £90,000

If your taxable turnover for the last rolling 12 months passes £90,000, you must register within 30 days of the end of the month you crossed it.

You expect to go over in 30 days

If you know a single month will take you over £90,000 on its own, you must register before the end of that 30-day period, not after.

You choose to (voluntary)

Below the threshold you can register voluntarily. Worth it if you sell mostly to VAT-registered businesses, or buy a lot you could reclaim VAT on.

You buy from abroad

Buying certain goods or services from overseas suppliers can trigger a registration requirement even if your UK sales are under the threshold.

Should you register early?

Voluntary registration: the trade-off

You can register before you hit £90,000. Whether that is a good idea comes down to one question: can your customers reclaim the VAT you would charge them? If you sell mostly to VAT-registered businesses, the answer is usually yes and registering early can pay. If you sell to the public, adding 20% is a real price rise, so most wait until they have to.

VAT registration, handled Try the VAT calculator

Registered for VAT

The upsides and the downsides

  • You reclaim the VAT you pay on stock, equipment, software and other business costs.
  • Looks more established to larger clients, some will only deal with VAT-registered suppliers.
  • No surprise backdated bill from accidentally trading over the threshold unregistered.
  • You add 20% to your prices, which can sting if your customers are the public and cannot reclaim it.
  • Quarterly returns to prepare and file under Making Tax Digital, so more admin.
  • You become a tax collector for HMRC, holding their money until each return is due.

Not sure which way to go? Ask us, it is a quick conversation.

Questions

VAT registration questions, answered

Do I legally have to register for VAT?
You must register for VAT if your taxable turnover for the previous 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. This is a rolling 12-month figure, not your accounting year or the tax year, so it can be triggered at any point. Below £90,000 registration is optional. If you go over and do not register on time, HMRC can charge the VAT you should have collected plus penalties, so it pays to watch the figure as you grow.
How much can I earn before registering for VAT?
You can earn up to £90,000 in taxable turnover over any rolling 12-month period without being required to register. The moment your trailing 12-month total passes £90,000 the clock starts. Note this is turnover (your taxable sales), not profit, and it ignores VAT-exempt income such as most insurance, finance and certain education.
Do sole traders pay VAT?
Yes, the £90,000 threshold applies to sole traders exactly as it does to limited companies. VAT follows the person or business making the sales, not the legal structure. If you are a sole trader trading over the threshold you must register, charge VAT on your sales (including on your labour, not just materials) and file returns. Below the threshold you can stay unregistered or register voluntarily.
Is the first £90,000 VAT free?
Not exactly. The £90,000 is the point at which registration becomes compulsory, not a tax-free band. Before you register you do not charge VAT at all. Once you are registered you charge VAT on all your taxable sales going forward, you do not get to ignore the first £90,000. VAT is also not charged retrospectively on turnover from before your registration date.
Is it worth registering for VAT as a small business?
It depends on who your customers are. If you sell mainly to other VAT-registered businesses, voluntary registration is often worth it: they reclaim the VAT you charge, and you reclaim the VAT on your own costs. If you sell to the public or to businesses that cannot reclaim VAT, registering means a 20% price rise they will feel, so it is usually better to wait until you must. We are happy to run the numbers for your situation.
What happens if I register late?
You must still account for the VAT from the date you should have registered, which can mean a bill for VAT you never charged your customers, plus a failure-to-notify penalty based on how late you were and whether the delay was careless or deliberate. Registering on time, or getting help to monitor the threshold, avoids all of this.

Related: how long does registration take? · can I deregister for VAT?

Official threshold and rules: Register for VAT, GOV.UK.

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Approaching the VAT threshold?

We will tell you whether to register, handle the registration, and take quarterly VAT off your plate under Making Tax Digital. Fixed fee, no obligation.

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