Hello NewcoThe £90,000 threshold: two tests
- Looking back: your VAT-taxable turnover for any rolling 12 months goes over £90,000. Check at the end of every month, not just at your year end.
- Looking forward: you expect turnover in the next 30 days alone to go over £90,000.
You have 30 days to register
Under the looking-back test, register within 30 days of the end of the month you went over. Under the looking-forward test, register by the end of that 30-day period.
Registering late
If you register late, HMRC will backdate your registration. You owe VAT on sales from the date you should have registered, even if you never charged it to your customers, and you may face a penalty too.
Registering voluntarily
| Pros | Cons |
|---|---|
| Reclaim VAT on your costs | Prices rise by 20% for customers who can't reclaim VAT |
| Can look more established to bigger clients | More admin and filing deadlines |
Digital records and quarterly returns
Once registered, you must keep digital VAT records and file returns with compatible software under Making Tax Digital. Most businesses file every quarter.
Quick answers
What is the VAT registration threshold?
£90,000 of VAT-taxable turnover. You must register if turnover for any rolling 12 months goes over it, or if you expect turnover in the next 30 days alone to go over it.
How long do I have to register for VAT?
Under the looking-back test, within 30 days of the end of the month you went over. Under the looking-forward test, by the end of that 30-day period.
What happens if I register for VAT late?
HMRC backdates the registration. You owe VAT on sales from the date you should have registered, even if you never charged it, and you may face a penalty.
Should I register for VAT voluntarily?
It lets you reclaim VAT on costs and can look more established, but prices rise by 20% for customers who cannot reclaim VAT and there is more admin.
Video transcript
Read what's said in the part 5 video
Part five: VAT. When do you have to register?
One: the test. You must register if your VAT-taxable turnover goes over £90,000 in any rolling twelve months, not just your tax year. Or if you expect to go over it in the next thirty days alone.
Two: the deadline. Register within thirty days of the end of the month you went over. Register late, and you'll owe VAT on sales since you should have registered, and maybe a penalty.
Three: under the threshold, it's your choice. Registering lets you reclaim VAT on costs, but you'll usually add 20% to your prices, which matters if you sell to the public.
Four: once registered, charge VAT, keep digital records and file returns with compatible software, usually every quarter.
This is general information, not advice. Follow for part six: where limited liability stops.