If you run a business, understanding whether you need to register for VAT is crucial. Getting it wrong can lead to penalties. This guide explains the essentials in simple terms.
Who Needs to Register for VAT?
The main trigger for VAT registration is your business’s turnover.
- Compulsory Registration: You must register for VAT if your turnover was over £90,000 in the last 12 months (this is the threshold from 1 April 2024). This isn’t fixed to the tax year; it’s any rolling 12-month period. You also need to register if you expect your turnover to go over £90,000 in the next 30 days alone.
- Taxable Turnover: This includes the total value of everything you sell that isn’t exempt from VAT.
- Voluntary Registration: You can choose to register for VAT even if your turnover is less than £90,000. This might be beneficial if you mainly sell to other VAT-registered businesses, as you can reclaim VAT on your purchases. However, it also means you must charge VAT on your sales, which could make you more expensive for customers who aren’t VAT registered. Consider this decision carefully.
When Should You Register?
Timing is important.
- Looking Back: Check your turnover at the end of every month. Add up your turnover for the last 12 months. If it’s over £90,000, you must register. You have 30 days from the end of the month you went over the threshold to register. Your registration date will be the first day of the second month after you go over.
- Looking Forward: If you realise at any point that your total VAT taxable turnover will exceed £90,000 in the next 30 days alone, you must register immediately.
How Do You Register?
Most businesses register for VAT online through the HMRC website. You’ll need to provide information such as:
- Your business activity and turnover.
- Your business bank account details.
- Your National Insurance number (if you’re a sole trader) or company registration details.
Once registered, HMRC will send you a VAT registration certificate, confirming your VAT number and your first VAT return period.
What Happens After Registration?
Registering for VAT brings new responsibilities:
- Charging VAT: You must charge the correct amount of VAT on your sales (standard rate is currently 20%).
- VAT Invoices: You need to issue proper VAT invoices.
- VAT Returns: You must submit regular VAT returns to HMRC, usually quarterly. Most businesses must follow Making Tax Digital (MTD) rules, submitting returns using compatible software.
- Paying VAT: You pay HMRC the difference between the VAT you’ve charged and the VAT you’ve paid on business purchases.
- Keeping Records: You need to keep accurate VAT records for at least six years.
Getting Help with VAT
VAT rules can seem complex, especially when considering different schemes like the Flat Rate Scheme or Cash Accounting Scheme. Calculating turnover, understanding deadlines, and managing MTD can be challenging. If you’re unsure about any aspect of VAT registration or management, seeking professional advice from a small business accountant Bristol is wise. Local Bristol Small Business Accounting Experts can guide you through the process, ensure compliance, and help you choose the most suitable VAT scheme for your circumstances.
Understanding your VAT obligations is a key part of running a successful UK business. By knowing when and how to register, and what your responsibilities are afterwards, you can stay compliant and avoid unnecessary stress.
