VAT registration: When is the “right” time?
Registering for VAT is a bit like moving house or switching your phone contract; it feels big, official, and slightly scary.
And most business owners ask the same thing:
“Should I do it now? Wait a bit longer? Am I even meant to be VAT registered?”
If you’ve got questions about VAT, when to register, what the threshold is, or whether you’ll regret it, this post will break it down in plain English, with no fluff and no jargon.
🧾 What is VAT?
VAT stands for Value Added Tax. It’s a tax that businesses collect on behalf of HMRC when they sell goods or services.
The standard VAT rate is 20% in the UK
Some things are charged at 5% or 0%, or even exempt
When you’re VAT registered:
You add VAT to your sales
You can reclaim VAT on most purchases
You submit a VAT return to HMRC (usually quarterly)
📈 When should I register for VAT?
There are two ways to register:
1. Compulsory VAT registration
You must register if:
Your VAT taxable turnover exceeds £90,000 in any rolling 12-month period
Or you expect it to go over in the next 30 days alone
That 12-month rule trips people up, it’s not a calendar year or financial year. It’s a rolling window.
So if your turnover from Sept 2023 to Aug 2024 is over £90k even if no single month is huge, you still have to register.
📌 You must register within 30 days of hitting the threshold, or you could face penalties.
2. Voluntary VAT registration
Even if you’re under the £90k threshold, you can choose to register early, and sometimes it’s a smart move.
We’ll talk about why below 👇
🤔 How do I know if I’ve hit the threshold?
Here’s what counts towards your VAT taxable turnover:
Invoices for goods and services you sell in the UK
Zero-rated items (like children’s clothes or some food items)
Sales to other businesses or consumers
It doesn’t include:
Income from outside the UK
VAT-exempt income (like certain education or medical services)
Some grant income
💡 If you’re not sure, we can help you track your rolling 12-month turnover so you don’t get caught out.
💡 Should I register voluntarily?
Here are some good reasons to register before you hit £90k:
✅ You mainly sell to VAT-registered businesses
Your clients can reclaim the VAT you charge, so it doesn’t impact them. Meanwhile, you get to reclaim VAT on your costs. Win-win.
✅ You want to reclaim VAT on start-up or setup costs
Bought a laptop, software, office furniture? If you’re VAT registered, you can often reclaim the VAT, which adds up fast.
✅ You want to look more established
Let’s be honest, in some industries, being VAT registered makes you look like a bigger, more legit operation. That can help with tenders, funding, or trust.
🚩 When not to register (yet)
There are situations where early registration might not make sense:
🚫 You sell mostly to the general public (non-VAT registered)
If your customers can’t reclaim VAT, you either have to raise your prices or take the VAT hit from your profit.
🚫 Your expenses are low
If you’re service-based and don’t have a lot of VATable costs, reclaiming VAT might not save you much, and you’ll just have extra admin.
🚫 You’re not ready for the admin
VAT returns, digital record-keeping (thanks, Making Tax Digital), different VAT rates… if you’re already drowning in spreadsheets, it might be worth sorting your systems first.
🔄 Can I deregister later?
Yes, if your turnover drops below the threshold, you can apply to deregister.
You’ll need to weigh up the impact on your pricing, systems and suppliers, but you’re not locked in forever.
That said, chopping and changing too often can confuse your customers, so it’s best to think ahead and make a strategic decision.
💻 What do I need to register?
You’ll need:
Your business name and contact info
Your turnover details
Your business bank account
A Government Gateway login
📌 You can register online at GOV.UK: Register for VAT
Once registered, you’ll:
Receive a VAT number
Submit VAT returns (usually every 3 months)
Need to use compatible accounting software to keep digital records
🤯 VAT schemes: Yes, there’s more than one!
You can choose from different schemes when you register:
Standard VAT Accounting, the usual “charge VAT, reclaim VAT, submit return” method
Flat Rate Scheme, a simplified version where you pay a fixed % of turnover (helpful for low-cost service businesses)
Cash Accounting Scheme, pay VAT only when you’re paid (good for cash flow!)
Annual Accounting Scheme, submit one return per year instead of four
Choosing the right scheme depends on your cash flow, admin preferences and business type… we can help you decide.
✨ Feeling unsure about registering?
We help growing service-based businesses figure out when to register for VAT, how to register, and what to do next.
If you’re not sure whether VAT is right for you yet or worried about what registration will mean, book a free call and we’ll talk it through, step by step.
You can call us on 0117 290 1204 to speak with a friendly team member or email us ask@barrettstacey.co.uk
