In short
- You must register if your taxable turnover for the last 12 months goes over £90,000.
- You must also register if you expect to go over £90,000 in the next 30 days.
- You can register voluntarily below the threshold.
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What is taxable turnover?
It is the total value of what you sell that is not VAT-exempt. Zero-rated sales still count, because they are taxable supplies charged at 0%. It is a sales figure, not profit.
The two tests
1. The rolling 12-month test
Check your taxable turnover every month against the previous 12 months. If it goes over £90,000, you must register within 30 days after the end of the month you went over. Your registration takes effect from the first day of the second month after you exceeded the threshold.
2. The 30-day forward-looking test
If you expect your taxable turnover to go over £90,000 in a single 30-day period, you must register by the end of that period. Your effective date is the day you realised this, not the day turnover crossed the threshold.
Registering voluntarily
You can register even if you are below £90,000. This can make sense if your customers are VAT-registered businesses and you want to recover VAT on your costs, but it also adds admin, so it is worth discussing first.
What changes once you are registered
- You charge VAT on taxable sales. The standard rate is 20%, the reduced rate is 5% and the zero rate is 0%.
- You keep VAT records and submit a VAT return, usually every 3 months.
- The return and the payment are normally due one calendar month and 7 days after the end of the accounting period.
- You can usually reclaim VAT on business purchases, with some exceptions.
What if I register late?
You may owe VAT on sales made since you should have registered, and HMRC can charge a penalty. If you think you have gone over the threshold, check your figures now and act quickly.
A simple monthly habit
- Add up your taxable turnover for the last 12 months at each month end.
- Note how close you are to £90,000.
- If you are approaching it, or expect a large contract, check the 30-day test too.
VAT returns are prepared and submitted through Making Tax Digital from £75 a return. See services and fees.
This guide is general information, not personalised tax advice. Rules, thresholds and dates can change, so check GOV.UK or get advice on your own circumstances.