How to register for VAT in the UK

Many businesses need or want to register for VAT (Value Added Tax). In this article, we’ll take you through the whole registration process for UK businesses — from eligibility to timelines, and from the steps you follow to what happens next.

Do I need to register for VAT?

First things first, do you need to be registered for VAT? Well, this depends on whether or not you meet the registration threshold.

What’s the VAT registration threshold?

The threshold is the amount of taxable turnover above which you have to register for VAT. Your taxable turnover is everything you sell that’s VATable. That includes standard rate VAT, reduced rate VAT, and zero rate VAT, but not any turnover that’s VAT-exempt.

Read more: How to calculate VAT

At the time of writing, the VAT registration threshold is £90,000, but check gov.uk for any updates. There are two ways you might reach this threshold:

• Backward look — if your total taxable turnover from the past 12 months is above the threshold.
• Forward look — if you expect your taxable turnover to be more than the threshold within the next 30 days.

Note there are some extra rules that might apply to Northern Ireland businesses trading with the EU — check the government’s website for details.

Does my small business need to be VAT registered?

• Yes: if you meet the threshold for VAT, you’re legally required to register. If you don’t, you could face a penalty.
• No: if your business only deals in goods and services that are exempt from VAT, you’re not allowed to register.
• Maybe: if you don’t meet the threshold but you sell VATable goods and services, you can choose to register for VAT voluntarily. More on the pros and cons of this later.

Exceptions and exemptions to VAT registration

Businesses that only sell VAT-exempt goods and services can’t register for VAT. Businesses that mainly sell zero-rated goods and services can also request an exemption from HM Revenue and Customs (HMRC).

Another common reason you might be granted an exception is if you’ll only be crossing the threshold temporarily. If you can prove your taxable turnover will soon return to below the threshold, HMRC should approve your request.

An important part of any business development is making sure it’s properly covered. Chat with the Howden team about your growing business and all its insurance needs.

Get a quote

When do I need to register for VAT?

It’s important to register promptly, otherwise you could receive a fine from HMRC. When to register for VAT depends on how you reach the VAT threshold:

• Backward look: you need to register within 30 days of the end of the calendar month during which you reached the threshold. For example, if you reach the threshold on 20 December, you need to register by 30 January. Your effective date of registration (i.e., when you actually start charging VAT) will be the start of the second month after the month during which you reached the threshold, so from 1 February in this instance.
• Forward look: you need to register within 30 days of realising you’ll exceed the threshold, i.e., not within 30 days of reaching the threshold. For example, if you receive an order on 1 October that you realise will take you above the threshold, but you don’t receive payment until 1 November, you still need to register within 30 days of 1 October. Your effective date of registration will start from the day you realised you’d exceed the threshold, so from 1 October in this case.

Can I register for VAT myself?

You can complete the VAT registration process yourself. The best and easiest way to do so is online. But there are some instances where you have to or can choose to register via post. Let’s take a look at both:

How to register for VAT online

Most businesses will register for VAT online via the government’s website. You can also apply for exemptions online.

1. Select “Start now”.
2. Enter your Government Gateway user ID and password. If you don’t have a Government Gateway ID, you’ll need to sign up for one first.
3. Select “Create a new application”.
4. Check before you start. Answer the series of questions, for example where your business is based, the type of business you’re registering, and why you’re registering for VAT.
5. Verify the business. Confirm the information relevant to your business — more on this below.
6. About you. Provide your personal details, such as your name, your role in the business, and your contact details.
7. About the business. Provide further details about your business, such as your business address and your activities.
8. VAT registration. Provide information about your VAT situation, for example your estimated taxable turnover for the next year and your payment details.
9. Attachments. Upload one document to verify your identity, for example your passport, and two documents to evidence this, for example a recent utility bill.
10. Send the application. Check all your answers are complete and accurate, and then submit your VAT application.

How to register for VAT via post

There are a few reasons why you might have to register via post, including if:

• You’re applying for a registration exception
• You want to join the Agricultural Flat Rate Scheme
• You’re a local authority
• You’re registering an overseas partnership.

You can also choose to apply by post if it’s difficult or impossible for you to apply online, for example, because:

• You have a health condition or disability that prevents you from doing so
• You don’t have any internet access.

If you’re applying by post, you’ll need to complete a VAT1 Application form:

1. Call HMRC to request a paper form.
2. Confirm why you’re applying by post.
3. If your request is accepted, HMRC will post you a form. If not, you’ll need to use the online service outlined above.
4. Fill in the application form. You might also need to print out and complete some extra forms depending on your business. The application form will confirm whether you need to do this.
5. Return the form to HMRC using the address provided.

How much does it cost to register for VAT?

It’s free — provided you complete the process yourself. The HMRC does not charge you to register for VAT.

However, if you would like to hire a professional such as an accountant or tax agent, you will have to pay them to complete the process for you.

How can you register for a VAT accounting scheme?

There are also a number of VAT accounting schemes you can register for if eligible. These make it easier for smaller businesses to calculate and pay any VAT:

• Flat Rate Scheme: the VAT you owe is calculated as a percentage of your gross annual turnover.
• Annual Accounting Scheme: you only have to complete one return each year, although any VAT payments will still be quarterly.
• Cash Accounting Scheme: you pay VAT once you actually receive payment from your customers, not as soon as you invoice them.

To be eligible for the Flat Rate Scheme, your annual taxable turnover must be no more than £150,000 (at the time of writing). For the other two, it must be no more than £1.35 million.

You can apply for these as you’re registering for VAT, or after you’ve registered if you prefer.

What information do you need to provide to register for VAT?

The exact information and documents you’ll need to provide will depend on the type of business and your specific circumstances. But there’s some standard information you can gather in advance to help you complete your application.

If you’re a limited company

• Company registration number
• Business bank account info
• Unique Taxpayer Reference (UTR)
• Annual turnover
• Self Assessment info
• Corporation Tax info
• Pay As You Earn (PAYE) info

Read more: What is PAYE?

If you’re an individual or partnership

• National Insurance number
• Identity document
• Bank account info
• Unique Taxpayer Reference, if applicable
• Annual turnover
• Self Assessment return info
• Payslips info
• P60 info

How long does VAT registration take?

Generally speaking, HMRC should get back to you within 30 working days. But this isn’t guaranteed, as there can sometimes be delays, especially if you applied by post.

What to do while waiting for VAT registration

HMRC will collect VAT from you starting from the effective registration date. This will be backdated if needed. But you’re not allowed to officially charge VAT until you’re registered and receive your VAT number. So, what should you do in the meantime?

Well, you should increase your prices by the relevant amount, e.g. by 20 per cent — but not as VAT. Once you’re registered, you’ll then need to re-issue any customers in that waiting period with an official VAT invoice. They can use this to reclaim VAT if they’re also VAT-registered.

What happens after you’re registered for VAT?

If your application is successful, you’ll receive your nine-digit VAT registration number via post. You should use this number to sign up for a VAT online account via your business tax account, which then allows you to manage your VAT return s. You should also use it on all your invoices.

Read more: What to know about your business tax account

When to cancel your VAT registration

If you’re no longer eligible for VAT, you must cancel your registration within 30 days. Reasons why you’ll become ineligible include:

• Stopping selling VATable goods and services
• Stopping trading altogether
• Joining a VAT group.

Even if you’re still eligible, if your taxable sales reduce and you meet the deregulation threshold, you can choose to cancel your registration. The threshold is currently £88,000 or less (check gov.uk for any updates). Or you might decide to stay registered voluntarily.

Is it worth registering for VAT voluntarily?

Even if they don’t have to register for VAT, some businesses still choose to do so. There are a few pros and cons to consider:

Pros of voluntary registration

• You can claim back VAT on your business purchases (called input VAT).
• Your VAT-registered customers can reclaim VAT on what they buy from you.
• You can potentially grow your business, as some companies will only trade with VAT-registered businesses.
• You might be able to backdate some VAT claims from before you were registered.

Cons of voluntary registration

• You’ll be charging your customers VAT (called output VAT). If a lot of your customers are individuals or small businesses, they might not be able to reclaim VAT themselves. This means they’d be shouldering the financial burden, which could make your business less appealing or competitive.
• If your output VAT is higher than your input VAT, you’ll owe VAT to HMRC, which could affect your cash flow.
• There’s more business admin involved, which can be time-consuming or expensive if you use external accountancy help.

If you’re not sure, one good option is to use HMRC’s VAT Registration Estimator tool. It developed this tool in collaboration with small businesses to help companies better understand the implications of VAT for them. It’s also a great way to decide if it’s worth registering voluntarily, as you’ll have a much clearer idea of the impacts on your business.

Also read:

• How to calculate turnover for your company
• What is a sole trader in the UK?
• Markup vs margin: what’s the difference?
• What is operating profit?
• Read more of our business insurance guides