VAT Registration

Know when you must register for VAT, choose the right scheme, and handle your VAT returns properly.

Last updated: 15 July 2026

What is VAT?

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold by VAT-registered businesses. When registered, you charge VAT to your customers and pay it to HMRC, but you can also reclaim VAT on your business purchases.

The standard VAT rate in the UK is 20%, though reduced rates (5% and 0%) apply to certain goods and services, and some items are exempt.

When Must You Register?

You must register for VAT if:

Turnover Threshold

Your VAT-taxable turnover exceeded £90,000 in any rolling 12-month period. You must register within 30 days.

Expected Turnover

You expect your VAT-taxable turnover to exceed £90,000 in the next 30 days alone.

EU Goods

You receive goods worth more than £90,000 from the EU (Northern Ireland rules apply).

'VAT-taxable turnover' includes sales that would be subject to VAT if you were registered, not just taxable sales you've actually made.

Should You Register Voluntarily?

Even if your turnover is below the threshold, you can choose to register voluntarily. This might be beneficial if:

Your customers are VAT-registered businesses (they can reclaim the VAT you charge)
You have significant VAT-able business expenses to reclaim
You want to appear more established to potential clients
You're buying capital equipment and want to reclaim VAT immediately

Consider the Admin Burden

VAT registration means quarterly returns, detailed record-keeping, and compliance obligations. Weigh the benefits against the additional work.

Which VAT Scheme Should You Use?

HMRC offers several VAT schemes that can simplify your accounting:

Flat Rate Scheme

Pay a fixed percentage of your turnover (based on your business type) instead of calculating actual VAT. Available if turnover is under £150,000. Simpler but may cost more.

Cash Accounting

Account for VAT when you receive or make payments, rather than when invoices are issued. Helps cash flow if customers are slow to pay.

Annual Accounting

Submit one annual return and pay in instalments throughout the year. Reduces paperwork but requires careful cash flow planning.

The three main VAT simplification schemes and who they suit.
Scheme	Turnover limit to join	How it works	Best for
Flat Rate	£150,000	Pay a fixed percentage of gross turnover instead of tracking VAT on every transaction	Service businesses with few VAT-able costs
Cash Accounting	£1.35 million	Account for VAT when you are actually paid, not when you invoice	Businesses waiting a long time to be paid
Annual Accounting	£1.35 million	One return a year with instalments through the year	Businesses that want fewer filing dates

How Does the Flat Rate Scheme Work?

The Flat Rate Scheme is popular with small businesses. You pay a fixed percentage of your gross turnover to HMRC, but you cannot reclaim VAT on purchases (with limited exceptions for capital assets over £2,000).

Example Flat Rate Percentages

Computer and IT consultancy14.5%

Management consultancy14%

Architect or surveyor14.5%

Retail food and confectionery4%

Limited cost trader16.5%

Note: 'Limited cost traders' (spending less than 2% of turnover on goods) pay 16.5%, which often makes the scheme less attractive.

When Are VAT Returns and Payments Due?

Most VAT-registered businesses submit quarterly returns using Making Tax Digital software:

Return Deadline

Submit your VAT return by the 7th of the second month after the VAT period ends (e.g., 7 May for January-March quarter).

Payment Deadline

Payment is due by the same date as the return. Direct Debit gives you an extra 3 days.

Making Tax Digital

All VAT-registered businesses must keep digital records and submit returns using compatible software. Spreadsheets alone are no longer sufficient.

Record Keeping

You must keep VAT records for at least 6 years, including:

Sales and purchase invoices
Credit and debit notes
Import and export documents
A VAT account summarising VAT owed and reclaimable
Records of any adjustments or corrections

Common Questions

VAT Registration FAQs

You must register once your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period, and you have 30 days to do it. You also have to register if you expect your VAT-taxable turnover to exceed £90,000 in the next 30 days alone. Remember that 'VAT-taxable turnover' includes sales that would be subject to VAT if you were registered, not just taxable sales you've actually made.

It can be worthwhile if your customers are VAT-registered businesses (they can reclaim the VAT you charge), you have significant VAT-able expenses to reclaim, or you're buying capital equipment and want the VAT back immediately. But weigh it against the admin burden: registration means quarterly returns, detailed record-keeping, and ongoing compliance obligations.

HMRC offers three main simplification schemes. The Flat Rate Scheme lets you pay a fixed percentage of turnover (available if turnover is under £150,000) instead of calculating actual VAT. Cash Accounting means you account for VAT when money actually changes hands, which helps if customers pay slowly. Annual Accounting means one return a year paid in instalments. Each trades simplicity against cost, so it depends on your business.

It's popular with small businesses because you just pay a fixed percentage of gross turnover, for example 14.5% for IT consultancy or 4% for retail food. The catch is you can't reclaim VAT on purchases (except capital assets over £2,000), and 'limited cost traders' who spend less than 2% of turnover on goods pay 16.5%, which often makes the scheme less attractive.

Most VAT-registered businesses submit quarterly returns. Both the return and the payment are due by the 7th of the second month after the VAT period ends, so a January-March quarter is due by 7 May. Paying by Direct Debit gives you an extra 3 days. Returns must be submitted through Making Tax Digital compatible software; spreadsheets alone are no longer sufficient.

At least 6 years. That covers sales and purchase invoices, credit and debit notes, import and export documents, a VAT account summarising VAT owed and reclaimable, and records of any adjustments or corrections.

Sources

Rates and thresholds on this page come from the official HMRC and Companies House guidance below. Tax rules change, so check the source if you are relying on a figure.

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