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When should I register my company for VAT?

June 17, 2023

When should I register my company for VAT?

Sorting out your tax registrations is one of the first things to tick off your to-do list as a new business owner. But knowing when (and how) to register for things like value-added tax (VAT) can be a confusing process for new entrepreneurs.

Here’s a straightforward breakdown of the VAT registration process.

Why does my business need to collect and pay VAT?

Value-added tax (VAT) is a consumption tax. It’s imposed on the value added at each stage of production and distribution of goods and services. By registering for VAT you become liable to collect the VAT charged on your invoices, and to then pay this tax to HMRC on a quarterly basis. You’ll also be able to claim back some of the VAT you’ve spent on eligible expenses.

What’s the threshold for VAT registration?

It’s not mandatory for every limited company or sole trader to register for VAT. Generally speaking, you will only register for VAT once your turnover reaches HMRC’s threshold, or if there’s a tax advantage of being VAT registered to claim certain operational expenses.

You must register for VAT if:

your total VAT taxable turnover for the last 12 months was over £85,000 (HMRC’s current VAT threshold).
you expect your turnover to go over £85,000 in the next 30 days.

Who else must register for VAT?

Regardless of whether you meet the threshold test, you must also register for VAT if all of the following condition are true for your business:

you’re based outside the UK
your business is based outside the UK
you supply any goods or services to the UK (or expect to in the next 30 days).

How to start the VAT registration process

To register for VAT with HMRC, you have two basic options:

Register your business online, via your Government Gateway account. This will create a VAT online account to manage your VAT payments and claims etc.
Ask your accountant to register you on your behalf. If we’re your tax agent, we can register your business for VAT and help you manage your VAT affairs.

Talk to us about getting registered for VAT

If you’re a new business that’s starting out, or an existing business that’s getting close to the £85k VAT threshold, please do contact us to talk through getting registered.

We’ll help you work out your turnover for the preceding 12 months and can advise you about the most tax-efficient reasons for making your business VAT-registered.

Get in touch to talk about VAT registration.

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