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The Compulsory Registration Threshold
A business must register for VAT when its taxable turnover — all sales of VAT-able goods and services, including zero-rated supplies — exceeds £90,000 in any rolling 12-month period (not a calendar year). Once breached, you must notify HMRC within 30 days of the end of the month in which you exceeded the threshold. Your effective date of registration will be the first day of the month following the breach.
You must also register if you expect your taxable turnover to exceed the threshold in the next 30 days alone — for example, if you win a large contract. Monitoring turnover on a rolling basis, not just annually, is essential to catching this trigger in time.
Voluntary Registration
Businesses below the threshold can register voluntarily. The principal commercial reason to do so is to reclaim input VAT on purchases — useful if your suppliers are VAT-registered and your customer base is primarily other businesses (who can themselves reclaim VAT on your invoices). Voluntary registration signals a certain scale to suppliers and lenders.
The downsides include administrative burden, the requirement to file VAT returns, and the need to charge VAT on your sales, which may be competitively disadvantageous if your customers are price-sensitive consumers or small non-VAT-registered businesses. Review the pros and cons carefully with your accountant before applying.
The Registration Process
VAT registration is completed online via HMRC's VAT Online Services. You will need your business's UTR, bank account details, and details of your main business activity and expected turnover. HMRC typically issues a VAT registration number within 30 working days, though this varies. You should not charge VAT on invoices until you have a VAT number, but you can show a notation that VAT will be charged once the number is issued.
On registration you may also choose a VAT accounting scheme — the standard quarterly return, the annual accounting scheme, the flat rate scheme (for eligible smaller businesses), or cash accounting. Each has different cash-flow and administrative implications. Confirm which suits your business with your accountant.
Obligations Once Registered
Once VAT-registered, you must: charge VAT at the correct rate on taxable supplies; issue VAT invoices to VAT-registered customers; file VAT returns (typically quarterly) through Making Tax Digital-compatible software; pay any VAT owed by the return deadline; and keep VAT records for at least six years. You must also notify HMRC of changes to your business details within 30 days.
Failure to register on time can result in a penalty based on the VAT that should have been accounted for since the effective registration date. HMRC may raise assessments and interest on top of the penalty. Early, proactive registration is nearly always cheaper than a belated correction.
Frequently asked questions
Does exempt income count toward the VAT threshold?
No. Only taxable supplies — standard-rated, reduced-rated, and zero-rated — count toward the threshold. Exempt supplies such as certain financial services, insurance, and residential lettings are excluded. However, a business making both taxable and exempt supplies may have partial exemption issues to consider. Confirm your position with your accountant.
Can we reclaim VAT on purchases made before we registered?
Yes, within limits. You can reclaim input VAT on goods purchased up to four years before registration (if still on hand at registration) and on services received up to six months before registration, provided the purchases relate to your taxable business activities.
Funding for UK limited companies
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