What is VAT?
VAT (Value Added Tax) is a tax charged on most goods and services sold by VAT-registered businesses in the UK. The standard rate is 20%, with reduced rates of 5% and 0% applying to certain goods and services. Businesses collect VAT on behalf of HMRC and pay it over periodically.
Who Needs to Register for VAT?
You must register for VAT if your taxable turnover exceeds the VAT registration threshold in any rolling 12-month period. As of 2024, this threshold is £90,000. You can also register voluntarily if your turnover is below this threshold, which can be beneficial in certain circumstances.
When Should You Register?
You must register within 30 days of the end of the month in which you exceeded the threshold. For example, if your turnover exceeded £90,000 in the 12 months to 31 March, you must register by 30 April and begin charging VAT from 1 May.
You can also register in advance if you expect to exceed the threshold soon.
How to Register for VAT
Most businesses register for VAT online through the HMRC website. Here's how:
- Go to gov.uk and search for "Register for VAT"
- Sign in to or create a Government Gateway account
- Complete the VAT registration form (VAT1) online
- Provide details about your business, turnover, and bank account
- Submit your application
HMRC will send your VAT registration certificate (including your VAT number) within approximately 30 working days, though it can take longer during busy periods.
What Happens After You Register?
Once registered, you must:
- Charge VAT on your taxable sales at the appropriate rate
- Issue VAT invoices to VAT-registered customers
- Submit VAT returns to HMRC (usually quarterly) via Making Tax Digital (MTD) compatible software
- Pay any VAT owed to HMRC by the deadline
- Keep VAT records for at least 6 years
Can You Reclaim VAT?
Yes — one of the key benefits of VAT registration is that you can reclaim VAT on eligible business purchases. This can be particularly valuable if you buy a lot of goods or services from other VAT-registered businesses.
VAT Schemes for Small Businesses
HMRC offers several VAT schemes designed to simplify VAT accounting for small businesses, including the Flat Rate Scheme, Cash Accounting Scheme, and Annual Accounting Scheme. Each has different rules and benefits depending on your business type and turnover.
Need Help with Your Business Setup?
If you're setting up or growing a UK business, Spectre Offices can help with your registered office address and director service address — essential foundations for any compliant UK company.
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