When should I register for VAT?

Legally your business should register for VAT with HMRC as soon as you are aware that your turnover will, or it has, exceeded £82,000. I should add that the £82,000 is calculated on a rolling basis, so don’t complete your annual accounts and think that you are okay for another year: it’s January to January, February to February and so on. There are penalties should you register late so it’s important that you keep your eye on your turnover, even if it’s just a simple list of invoices on excel.

If you are a sole trader we enter the “you are your business and your business is you” territory, so if you run multiple businesses and/or have rental income then the turnover for all of these will be classed as one for VAT purposes. This is why it is vital to keep, at the very least, basic records of all sales made.

Not every business needs to register for VAT. As always there are some exemptions such as education or healthcare, so GPs and nurseries are exempt. There are also partial exemptions but these cases are rare so you may want to talk to your accountant first, or at the very least take a look at HMRC’s website.

If you chose to, you could register for VAT before you have begun to trade. The £82,000 is the maximum turnover before registering becomes compulsory but plenty of business choose to register prior to this.

I recommend looking at your client based before you decide whether to voluntarily register for VAT. If all, or a vast majority of your clients/customers are VAT registered themselves then whether you are will make very little difference. In these instances, it could be beneficial to register. On the other end of the scale, if the all or the vast majority of your clients/customers are not VAT registered then it may be beneficial to hold off registering until you hit the £82k mark. I have known business owners to reduce their hours to keep themselves under the VAT threshold; everyone is different so it depends on your business but also your own personal goals and expectations.

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