VAT Registration in the UK: When, How, and What to Expect
Value Added Tax (VAT) is one of the areas that confuses many UK business owners. This guide explains everything — from when you must register, to which scheme is best for your business.
Written by: Ram Shah FCCA, Director of Ascot Accountancy — VAT specialist with 15+ years helping UK businesses with VAT compliance and planning.
The Key VAT Number: £90,000
You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period (as of April 2024). You must register within 30 days of exceeding this threshold.
Do You Have to Register for VAT?
VAT registration is compulsory if your taxable turnover exceeds £90,000 in any 12-month period. This is a rolling 12-month calculation — not a tax year calculation. So if at any point in the last 12 months your turnover exceeded £90,000, you must register.
You must also register if you expect your turnover to exceed £90,000 in the next 30 days alone.
Penalty for late registration: HMRC will charge you back-VAT from the date you should have registered, plus interest and penalties. This can be significant.
Should You Register Voluntarily?
You can register for VAT even if you are below the £90,000 threshold. Voluntary registration makes sense if:
- Your customers are VAT-registered businesses (they can reclaim the VAT you charge)
- You have significant VAT-able business costs you want to reclaim
- You want to appear larger and more established to clients
- Your turnover is growing and you will soon reach the threshold
Which VAT Scheme Should You Use?
Standard VAT Scheme
You charge 20% VAT on your sales and reclaim VAT on your purchases. You pay the difference to HMRC quarterly. Most businesses use this.
Best for: Most businesses
Flat Rate Scheme
You charge customers 20% VAT but pay HMRC a flat percentage (depending on your industry, e.g. 14.5% for consultants). You keep the difference. Simpler but may pay more VAT.
Best for: Businesses with few VAT-able costs and turnover under £150,000
Cash Accounting Scheme
You only account for VAT when you're paid (not when you invoice). Protects cash flow for businesses with slow-paying customers.
Best for: Businesses with turnover under £1.35m who have cash flow concerns
Annual Accounting Scheme
You make advance payments throughout the year and submit one VAT return per year instead of quarterly.
Best for: Businesses who want to reduce quarterly admin burden
What is Making Tax Digital (MTD) for VAT?
Since April 2022, all VAT-registered businesses must use MTD-compatible software to keep digital VAT records and submit returns. You cannot use HMRC's old online portal.
Compatible software includes Xero, QuickBooks, Sage, and FreeAgent. Ascot Accountancy can set up and manage your MTD-compliant accounting software as part of our bookkeeping and VAT service.
Need Help with VAT Registration or Returns?
We handle VAT registration, scheme selection, quarterly returns, and MTD compliance for businesses across London. Fixed fees. No surprises.
