Does your business need to be VAT registered?

Esther Shaw / 04 February 2016

When do you need to register a business for VAT? Are there any benefits to voluntarily registering for VAT? How do you register for VAT?



When you run your own business, it is easy to get carried away with the day-to-day operations, but it is vital that you don’t ignore important issues around tax.

Here we take a closer look at when you need to register for Value Added Tax (VAT).

When do you need to register for VAT?

As a business owner, it is good practice to keep tabs on how your business is doing, and how much you are making.

Crucially, if your business has a turnover of taxable goods and services of more than £82,000 in a 12-month period, you must register for VAT. Failure to do so can result in fines.

You will need to do this from the first day of the second month after your exceed the threshold. For example, if you exceed it in mid-November, you are required to be registered from January 1.

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Voluntary registration

Even if your business has not yet reached the £82,000 threshold, you may want to register voluntarily for VAT.

This can be very beneficial for new and small businesses.

This can make sense if, for example, you make the overwhelming majority of your sales to VAT-registered businesses, as you can then reclaim VAT on any business expense you incur.

This can be particularly helpful in the early stage of setting up a business when you are paying out a lot of money on products, stock and tools, but not necessarily invoicing for big amounts.

The refunds you get from HMRC can help to ease cash flow.

In addition, voluntary VAT registration can make your company appear larger and more established. This can be appealing to other VAT-registered businesses and clients.

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How to register

To register for VAT, you will need to complete a VAT application form from HMRC. You can do this online or fill out a paper copy and send it back.

Charging VAT

Once you have registered for VAT, you need to charge VAT at the standard rate of 20% on the goods and services you sell.

You can then also reclaim any VAT paid on goods and services purchased for your business.

Don’t forget that once you have registered, you will need to complete quarterly VAT returns online.

Each return will need to set out how much VAT you have charged, and how much you have paid.

If you have charged more than you have paid, you will need to make a payment to HMRC.

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What are the implications of being VAT-registered?

If you are registered for VAT, this will mean you prices will be more expensive for customers who are not VAT-registered, and who cannot claim back VAT. This can potentially be off-putting.

It can also mean you are less competitive than firms which are not registered.

Registration “exception”

If your taxable turnover goes over the threshold temporarily, you can apply for a registration “exception”.

To do this, you need to provide HMRC with evidence, and explain why you think your VAT taxable turnover won’t go over the de-registration threshold of £80,000 in the next 12 months.

HMRC will then consider your exception. If it agrees, it will write to you and confirm the exception.

If not, HMRC will register you for VAT.

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For more help

If you need help with VAT or other tax issues, it is worth seeking help from a professional who can help. 

Try an organisation, such as the Institute of Chartered Accountants in England and Wales.

Also visit Gov.uk/vat-registration/when-to-register

For more tips and useful information, browse our business and work articles.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.