For many growing businesses, VAT registration arrives as a surprise. The rules are not complicated, but the deadlines are firm, so it helps to know them before turnover gets close to the line.
The threshold
According to GOV.UK, you must register for VAT if your total taxable turnover is more than £90,000. A business that is already registered can apply to deregister if its taxable turnover falls below £88,000. GOV.UK notes that thresholds can change, so always check the current figures on the official page before you rely on them.
Two tests, not one
GOV.UK describes two separate tests:
- The rolling 12-month test. If your total taxable turnover for the last 12 months goes over £90,000, you must register within 30 days of the end of the month in which you crossed the threshold. Your registration takes effect from the first day of the second month after you crossed it.
- The next 30 days test. If you expect your taxable turnover to go over £90,000 in the next 30 days alone, you must register by the end of that 30-day period. Your effective date is the date you realised, not the date the money arrived.
GOV.UK gives an example of the second test: a business that arranges a £100,000 contract on 1 May must register by 30 May, and its effective date is 1 May.
Registering late
If you miss the deadline, you must pay VAT on sales made since the date you should have registered. GOV.UK adds that you might also face a penalty, depending on how much you owe and how late the registration is.
Registering voluntarily
You do not have to wait for the threshold. GOV.UK confirms that a business can register voluntarily even if its turnover is below £90,000.
A practical habit
Check your rolling 12-month turnover at the end of each month, and think about large one-off contracts as they are agreed. This article is general information, not tax advice. For your own position, use the GOV.UK guidance or speak to a qualified adviser.