VAT registration is a significant milestone for any growing business. Whether you're approaching the mandatory threshold or considering voluntary registration, understanding the implications is essential before you take the plunge.
2024/25 VAT Registration Threshold
£90,000
Taxable turnover in any rolling 12-month period
(Increased from £85,000 in April 2024)
When Must You Register?
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. This is not a calendar year — it's any 12-month period. You must register within 30 days of the end of the month in which you exceeded the threshold.
Important: You must also register if you expect your turnover to exceed £90,000 in the next 30 days alone.
Failure to register on time results in a penalty based on the VAT you should have paid from the date you should have registered.
Should You Register Voluntarily?
You can register for VAT even if your turnover is below the threshold. There are situations where this makes sense:
Reasons to register voluntarily
- You buy lots of VAT-able goods/services and can reclaim input VAT
- Your customers are VAT-registered businesses (they can reclaim the VAT)
- You want to appear more established and credible
- You're approaching the threshold and want to plan ahead
Reasons to wait
- Your customers are mainly consumers (they can't reclaim VAT)
- Adding 20% VAT would make you uncompetitive
- The admin burden isn't worth it at your current size
- Your profit margins are tight
Choosing the Right VAT Scheme
Once registered, you need to choose a VAT accounting scheme. The right choice depends on your business type and cash flow:
Standard VAT Accounting
Most businessesYou account for VAT on invoices when they're issued (not when paid). Submit quarterly returns. Best for businesses with straightforward VAT affairs.
Cash Accounting Scheme
Businesses with slow-paying customersYou only account for VAT when you receive payment (not when you invoice). Helps cash flow if customers take a long time to pay.
Flat Rate Scheme
Small businesses with low VAT costsPay a fixed percentage of your gross turnover to HMRC instead of calculating actual VAT. Simpler admin, but may cost more or less depending on your sector.
Annual Accounting Scheme
Businesses wanting simpler adminSubmit one VAT return per year instead of four. Make advance payments throughout the year. Reduces admin but requires good cash flow management.
How to Register for VAT
- 01Register online via HMRC
Go to gov.uk and register for VAT online. You'll need your UTR number, business details, and bank account information.
- 02Receive your VAT number
HMRC will issue your VAT registration certificate (VAT 4) within 30 working days. Your VAT number will start with GB.
- 03Set up MTD-compatible software
All VAT-registered businesses must use MTD-compatible software to keep digital records and submit returns. See our MTD guide for software recommendations.
- 04Start charging VAT
From your effective date of registration, you must charge VAT on all taxable supplies. Update your invoices and prices accordingly.
VAT Registration Made Simple
Our accounting and tax team handles VAT registration, scheme selection, and ongoing returns for Essex businesses. We'll make sure you're compliant from day one.
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