Do you need to register for VAT?
Find out in 30 seconds.

You must register for VAT if your taxable turnover (everything you sell that is not exempt or outside the scope of VAT) exceeds £90,000 over any rolling 12-month period. The clock is rolling, not the tax year. You must also register immediately if you expect to exceed £90,000 in just the next 30 days on its own, even if your historic 12 months are below the threshold. Once you cross either trigger you have 30 days to register and your registration takes effect from the first day of the second month after you crossed.

It depends on who your customers are. If your customers are VAT-registered businesses (B2B), voluntary registration usually saves you money because you reclaim VAT on your costs while your customers reclaim the VAT you charge them. If your customers are private individuals (B2C), voluntary registration typically costs you money because you either absorb the 20% by cutting your margin or pass it on and become 20% more expensive than competitors. The calculator above models both scenarios for your specific numbers.

The Flat Rate Scheme (FRS) lets you pay HMRC a fixed percentage of your gross VAT-inclusive turnover instead of working out output VAT minus input VAT every quarter. The rate depends on your sector (12% for IT consultants, 9.5% for construction, 14.5% for accountants and so on). For service businesses with low costs, FRS often saves £1,000 to £4,000 per year. But if you are classed as a Limited Cost Trader (goods spend below 2% of turnover or below £1,000 per year), you pay 16.5% which usually wipes out the saving. The calculator shows your exact FRS position by sector.

For B2B businesses where customers can reclaim VAT, registering has near-zero margin impact because you start charging 20% on top of your prices and your customers do not care. For B2C businesses, you face a choice: pass on 20% (becoming 20% more expensive than unregistered competitors) or absorb 20% (cutting your margin by 16.7%). For a sole trader earning £80,000 of profit on £100,000 turnover, absorbing the VAT cuts profit to about £63,000. This is why many B2C businesses pause growth at £88,000 to stay below the threshold. We model alternative growth strategies in the Tax Planning Workshop.

Yes. If you reasonably expect your taxable turnover for the next 12 months to fall below £88,000 (the deregistration threshold), you can apply to cancel your VAT registration. You can also deregister if you stop trading or stop making taxable supplies. Deregistration takes effect from the date HMRC agree, and you must account for VAT on any business assets worth more than £1,000 in total at the date of deregistration. We handle deregistration paperwork as part of the Limited Company or Sole Trader bookkeeping packages.

From April 2022 all VAT-registered businesses must follow Making Tax Digital for VAT. This means keeping digital records (Excel is allowed if you use bridging software, but cloud bookkeeping is much easier) and submitting VAT returns through MTD-compatible software. You must keep VAT invoices for sales and purchases, a VAT account showing the calculation, and import documents if applicable. Records must be kept for 6 years. LOYALS includes MTD-compatible bookkeeping in our Limited Company and Sole Trader packages from £75 per month for VAT-registered clients.