What is the VAT registration threshold?

The VAT registration threshold is £90,000 (from April 2024). If your taxable turnover exceeds £90,000 in any rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days, you must register for VAT. You can also register voluntarily below this threshold.

Should I register for VAT voluntarily?

Voluntary registration can make sense if your customers are VAT-registered businesses (they can reclaim the VAT you charge), you have significant VAT-liable expenses (you can reclaim the VAT), or you want to appear more established. However, if your customers are consumers, adding 20% to your prices may reduce demand.

What is the VAT flat rate scheme?

The Flat Rate Scheme lets you pay a fixed percentage of your gross turnover as VAT, instead of calculating VAT on each transaction. The percentage depends on your industry (typically 4-16.5%). You cannot reclaim VAT on purchases (except capital goods over £2,000). It simplifies accounting and can save you money if you have few VAT-liable expenses.

What happens if I do not register for VAT when required?

Failure to register on time can result in a penalty based on the VAT that should have been charged from the date you should have registered. You will also owe HMRC the VAT that should have been charged — which you may not have collected from customers. Register promptly when you approach the threshold.

VAT Registration Guide UK — When to Register, How It Works & Thresholds | PocketWise

Value Added Tax (VAT) is a consumption tax added to most goods and services in the UK. If your business turnover exceeds the registration threshold, you must register for VAT, charge it on your sales, and pay it to HMRC. This guide covers the essential rules, schemes, and decisions you need to get right.

VAT Basics

Feature	Detail
Standard rate	20%
Reduced rate	5% (some goods and services)
Zero rate	0% (still VAT-registered, but charge no VAT)
Exempt	Outside the VAT system entirely
Registration threshold	£90,000 (since April 2024)
Deregistration threshold	£88,000

How VAT Works

You charge VAT on your sales (output VAT)
You pay VAT on your business purchases (input VAT)
You pay the difference to HMRC (or reclaim if input exceeds output)

Example:

Transaction	Net	VAT (20%)	Gross
You sell services	£1,000	£200	£1,200
You buy supplies	£300	£60	£360
VAT owed to HMRC	—	£140	—

When You Must Register

Compulsory Registration

You must register if:

Your taxable turnover exceeds £90,000 in any rolling 12-month period (looking backwards), or
You expect your turnover to exceed £90,000 in the next 30 days alone

You must register within 30 days of the date you exceeded (or expect to exceed) the threshold.

What Counts as Taxable Turnover

Sales of standard-rated goods and services (20%)
Sales of reduced-rated goods and services (5%)
Sales of zero-rated goods and services (0%)
Not included: Exempt supplies and sales outside the UK (generally)

Monitoring Your Turnover

Check your rolling 12-month turnover regularly — at minimum, monthly. A sudden large contract or seasonal peak could push you over the threshold unexpectedly.

Voluntary Registration

You can register voluntarily even if below the threshold. Consider it if:

Advantage	Disadvantage
Reclaim VAT on business expenses	Must charge VAT on sales (may increase prices for consumers)
Appear more established/professional	Additional admin and record-keeping
Essential if selling B2B (business customers expect VAT invoices)	Must file VAT returns (quarterly)
Unlock VAT schemes (Flat Rate, Cash Accounting)	Possible cash flow impact

B2B businesses benefit most from voluntary registration because their customers can reclaim the VAT charged. B2C businesses may find that adding 20% to prices reduces demand.

How to Register

Online Registration

Create a Government Gateway account (if you don’t have one)
Go to HMRC’s online VAT registration service
Provide business details, turnover information, and bank details
Receive your VAT registration number (typically within 30 working days)
Start charging VAT from your effective date of registration

VAT Schemes

Standard VAT Accounting

You charge VAT on every sale, reclaim VAT on every purchase, and pay the difference each quarter. Good for businesses with significant expenses.

Flat Rate Scheme

Pay a fixed percentage of gross turnover instead of tracking input/output on every transaction:

Industry	Typical Flat Rate
Accountancy	14.5%
Computer repair	10.5%
Management consultancy	14%
Hairdressing	13%
Retailing (food)	4%
Construction	9.5%

Benefits: Simpler admin, potentially lower VAT bill if you have few expenses. Drawback: Cannot reclaim input VAT (except on capital goods over £2,000).

New businesses get an additional 1% discount in their first year of VAT registration.

Cash Accounting Scheme

Only account for VAT when you receive and make payments — not when invoices are issued. Benefits:

Better cash flow (don’t pay VAT until customer pays you)
Automatic bad debt relief
Available to businesses with turnover under £1.35 million

Annual Accounting Scheme

Submit one VAT return per year instead of four, with interim payments based on estimated liability. Reduces admin but requires good cash flow management.

VAT Returns

Under standard accounting, you file a VAT return every three months (quarterly), due one month and seven days after the quarter end.

Since Making Tax Digital for VAT became mandatory, all VAT returns must be submitted using compatible software.

Return Period	Filing + Payment Deadline
Jan–Mar	7 May
Apr–Jun	7 August
Jul–Sep	7 November
Oct–Dec	7 February

Common VAT Mistakes

Late registration — missing the threshold triggers backdated VAT liability and penalties
Charging VAT before registration — you cannot charge or display VAT until registered
Incorrect flat rate percentage — using the wrong industry rate
Not keeping VAT records — invoices must show VAT registration number, rate, and amount
Mixed supplies — incorrectly treating exempt or zero-rated supplies as standard-rated
Missing the filing deadline — triggers default surcharge or penalties under the new regime

When to Deregister

You can (and sometimes should) deregister if your taxable turnover drops below £88,000. Deregistration removes the admin burden and means you stop charging VAT. However, you may need to account for VAT on stock and assets at deregistration.

For more on managing your tax as a small business, see our self-employment tax guide and use our self-employment tax calculator to estimate your overall tax position.