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When should you register for VAT?

Updated: Mar 6

The VAT registration turnover threshold is £90,000; your business must register for VAT if:(continue reading below)

your business must register for VAT if:

  1. you expect your VAT taxable turnover to be more than £90,000 in the following 30-day period (meaning you have a very large job / very busy month ahead), or

  2. your business had a turnover of more than £90,000 over the last 12 months

Count your turnover on a rolling 12-month basis 🗓️

If you’re getting anywhere near the threshold, you must count your turnover at the end of each month on a rolling 12-month basis, i.e. for the previous 12 months. To do this, download and use our VAT Turnover Tracker Spreadsheet. A common trap is to only count your turnover at the end of your accounting year – this is not the correct method and has led to many late VAT registrations, underpaid VAT and HMRC penalties.

When must you submit your application to register? 📝

You must register within 30 days of the end of the month that you cross the threshold.

For example: By the end of June, your 12-month rolling count shows that you crossed the VAT registration threshold. You must submit your application to register by 30 July, and your Effective Date of Registration (EDR) will be 1 August (notice that during July, you're trading over the threshold, but you do not have to charge VAT).

The penalties for late VAT registration can be very costly, see: VAT ⚠️ Late submission and payment penalties summarised

Should my business voluntarily register for VAT?

If you’re selling primarily to the general public or small businesses, then VAT registration essentially becomes a cost to bear. For example, if your Cost of Sales is typically 50% of your sales, then you would need to increase your prices by at least 10% to cover the additional cost of VAT (sales +20% output VAT, less costs -20% input VAT x 50% margin).

If you’re selling primarily to VAT-registered businesses, then voluntarily registering for VAT might be worthwhile even if you’re trading under the threshold. Essentially your output VAT will be reclaimed by your customers, and you can reclaim the input VAT. Seek advice – the tax saving needs to outweigh the extra admin.

If you think you might be approaching the VAT registration threshold, get in touch for advice.

Download and use our VAT turnover tracker spreadsheet 👇

VAT turnover threshold test MAC
Download XLSX • 22KB

Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇

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