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• How to register for VAT in the UK: Step-by-Step Guide [2024]

How to register for VAT in the UK?

What is the VAT threshold in the UK?

With effect from 1 April 2024, the VAT threshold for businesses in the UK is £90,000. Prior to April 2024, the threshold was £85,000. The threshold was increased in the Spring budget.

When do you need to register for VAT?

You must register for VAT if your total VAT taxable turnover exceeds the VAT registration threshold, i.e. £90,000 over a 12-month period.

VAT taxable turnover means the total value of sales that is not exempted from VAT. If your turnover exceeds this threshold, you are required to register within 30 days. Failure to do so can result in penalties.

You should also register for VAT if you expect your taxable turnover to go over £90,000 in the next 30 days.

You must also register (regardless of taxable turnover) if all of the following are true:

• you’re based outside the UK
• your business is based outside the UK
• you supply any goods or services to the UK (or expect to in the next 30 days)

You can also choose to voluntarily register for VAT even if your taxable turnover is below the threshold, i.e. £90,000 if you:

1. Supply goods or services to VAT-registered businesses and want to reclaim VAT on your purchases.
2. Wish to boost your business's credibility, as being VAT-registered may give the impression that your business is larger than it is.

How to calculate your VAT taxable turnover?

Taxable turnover refers to the total value of all goods and services you sell that are not exempt from VAT or classified as 'out of scope.'

It also includes:

• zero-rated goods
• reduced-rated goods
• standard-rated goods
• goods you hired or loaned to customers
• business goods used for personal reasons
• goods you bartered, part-exchanged or gave as gifts
• services you received from businesses in other countries that you had to ‘reverse charge’
• goods and services which are subject to the ‘domestic reverse charge’
• building work over £100,000 your business did for itself

Choosing the right VAT accounting scheme

There are different VAT schemes available, and it is important to choose the one that suits your business. They are:

1. Standard VAT Accounting: You charge VAT on your sales and reclaim VAT on your purchases.
2. Flat Rate Scheme: Available to businesses with a turnover of £150,000 or less, this scheme simplifies VAT by allowing you to pay a fixed rate on your sales. You cannot reclaim VAT on most purchases.
3. Cash Accounting Scheme: Under this scheme, you pay VAT based on the payments you receive rather than invoices issued. This can help with cash flow.
4. Annual Accounting Scheme: You pay VAT in advance based on your estimated turnover and submit one annual return instead of quarterly ones.

How to register for VAT?

You can register for VAT online at the UK government’s VAT registration portal. Alternatively, you can also take a professional’s help if you are not comfortable with the process.

If you are a limited company, you will need the following ready to register for VAT:

• Company Name
• Company Registration Number
• Turnover and nature of business
• Unique Taxpayer Reference (UTR)
• Details of your annual turnover
• Business Bank account details
• Corporation Tax
• Self Assessment
• Pay As You Earn (PAYE)

If you are registering as an individual or as a partnership, you will need:

• National Insurance number
• Identity document (Passport or Driving Licence)
• Bank account details
• Unique Taxpayer Reference (UTR)
• Details of your annual turnover
• your Self Assessment return
• payslips
• P60

What happens after you register for VAT

After registering, you’ll receive a VAT registration certificate from the HMRC, which will include your VAT number and the effective date of your registration. This usually arrives within 30 working days of registration but can take longer in some cases. You must start charging VAT from the effective date provided by HMRC.

You will also receive information about how to setup your business tax account and information about when to submit your first VAT return and payment.

Important Points:

• You must include a 9-digit VAT registration number on all invoices
• Add VAT to your prices
• Issue VAT invoices to your customers
• File VAT returns and pay any VAT owed to HMRC
• Maintain digital VAT records and a VAT account

Submitting VAT Returns

As a VAT-registered business, you’ll need to file VAT returns, typically on a quarterly basis. You can submit your returns via HMRC’s Making Tax Digital (MTD) service, which requires businesses to keep digital records and submit VAT returns through compatible software.

Each VAT return summarises:

• The VAT you've charged on sales (output tax).
• The VAT you've paid on purchases (input tax).

You’ll either pay the difference to HMRC or claim a refund if your input tax exceeds your output tax.

VAT Compliance

Once you’re VAT-registered, it’s important to stay compliant with VAT regulations, including:

• Displaying VAT on your invoices
• Keeping accurate VAT records
• Filing your VAT returns and making payments on time
• Complying with any HMRC inspections or audits

What are the penalties for not registering or late registration?

If you don’t register or register late, you'll be required to pay VAT on any sales made from the date you were supposed to register.

Additionally, you may incur a penalty based on the amount owed and the length of the delay in registration.

How and when to deregister from VAT?

If your business’s taxable turnover falls below the deregistration threshold (currently £88,000), you may be eligible to deregister for VAT. You can also voluntarily deregister if you expect your turnover to fall below this threshold in the future. To do this, you’ll need to complete a VAT deregistration form through your Government Gateway account.

One important thing to note is that VAT deregistration is not mandatory. You can continue being VAT registered even if your taxable turnover is below the VAT threshold, i.e. £90,000.

You can cancel VAT registration if you have stopped trading or selling VAT taxable goods or supplies. Alternatively, you can also transfer VAT registration from one business to another.

If you need any professional help regarding VAT registration, you can get in touch with any of our trusted limited company accounting partners.

Our Limited Company Accountancy Partners

Below is a list of our highly trusted and recommended limited company accountants. They provide exceptional accountancy services for a fixed-fee. They are fully compliant with HMRC tax regulations and IR35.