VAT Registration UK: When to Register and How It Works

You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect it to exceed £90,000 in the next 30 days alone. Registration is with HMRC and typically takes 1 to 4 weeks.

Once registered, you charge 20% VAT on most goods and services. Some items carry the 5% reduced rate (home energy is the most common example) and others, including most food and children's clothing, are zero-rated. You collect VAT from customers and pay it to HMRC, minus the VAT you have been charged on business purchases (input tax). VAT returns are usually submitted quarterly via Making Tax Digital (MTD) compatible software.

The rolling 12-month rule is not a tax-year figure. If you cross £90,000 at any point across a 12-month window, you must register within 30 days of the next month. Miss it and HMRC can still hold you liable for the VAT on sales you made before you registered.

Voluntary registration below the threshold can be beneficial if your customers are VAT-registered businesses. They reclaim the VAT you charge them anyway, so it costs them nothing, and you get to reclaim the input VAT on your own costs. If your customers are largely consumers or non-VAT-registered businesses, adding 20% to your prices is a harder sell.

The Flat Rate Scheme simplifies things for smaller businesses. You charge 20% to customers but pay HMRC a fixed percentage of gross turnover, and the rate depends on your industry (14.5% for computer and IT consultancy, for example). You keep the difference between what you collect and what you pay HMRC. In your first year as a VAT-registered business you get an extra 1% discount on your flat rate.