VAT Registration for UK
Do I really need to register for VAT?
The need to register is dependent on your yearly turnover amount. If your business has reached sales of goods and services (only those which are known as taxable goods and services) worth £90,000 (as per the April 2024 revision in UK law for VAT), you are required to be registered with HMRC to pay VAT. You should immediately register in two cases:
- If your Turnover Rate in the last 12 months has already exceeded the threshold of £90,000
- Or you expect that your last 12 months’ turnover rate will soon exceed the threshold
Note: Also to remind you, the last 12 months’ turnover rate calculation is a little different than your calendar or financial year. Assume that your financial year ends in August of 2025. However, in September 2025, if the yearly turnover rate for the last 12 months exceeded ninety thousand £, then you’re officially required to be registered for VAT.
Read More About VAT:
Is VAT Registration Right for My Company?
Why would I consider voluntary registration?
Even if your business turnover is below £90,000 in the last 12 months, you can still choose to register for VAT even though it’s not required. Voluntary registration can bring some benefits.
One main advantage is that you can reclaim VAT on the goods and services you buy for your business. For example, if you collected £1,200 in VAT from your customers and you bought goods worth £1,000 from a VAT-registered supplier (which normally includes £200 VAT), then the VAT you pay to HMRC will be your collected VAT (£1,200) minus the VAT you already paid (£200). This means you would only send £1,000 to HMRC. In some cases, if your input VAT is higher than your output VAT, you may even get a refund.
Being VAT-registered can also make your business look more professional and established. You will be given a VAT registration number which you can display on your invoices, website, and other business documents. This can help build trust with other businesses and customers.
However, there are also things to think about. Once registered, you must charge VAT on your sales, which may increase your prices if your customers are not VAT-registered. You will also have extra responsibilities, such as keeping VAT records and filing VAT returns regularly.
In short, voluntary registration can help you reclaim VAT and boost your business image, but you should weigh the benefits against the extra costs and admin work involved.
What happens after registration?
Once HMRC approves your registration, you will receive:
- a VAT registration certificate (confirming your VAT number, the date you registered, and when your first return is due).
From then on you must:
- charge VAT on taxable sales from your registration date
- show your VAT number on invoices and business documents
- submit VAT returns (usually every three months) using Making Tax Digital software
- keep VAT records and receipts for at least six years
- reclaim VAT on eligible business purchases
What penalty will I face in case I register?
If you don’t register in case of not being eligible (the £90,000 threshold), then no penalty ofcourse. However, if you were eligible, then the HMRC will charge the VAT from when it was due but also a failure to notify penalty, of which the rate depends on how late you were and whether you voluntarily disclosed the issue:
- 30% to 100% if the failure was deliberate and concealed.
- 0% to 30% of VAT owed if the failure was not deliberate.
- 20% to 70% if the failure was deliberate but not concealed.
Interest upon late VAT payment may also be charged in some cases.
