When You Should Register for VAT (and How to Do It) in 2025

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Scared of figures? Think accounting’s a dark art? I Hate Numbers is your straight talking guide to business numbers and mindset. No jargon, no fluff. Just clarity. One reader said, brilliant to have on the bookshelf for whenever you need to demystify the world of numbers. Highly recommended. Check out Waterstone's, Amazon, and our website and show those numbers who’s boss.

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Welcome to this week's episode of I Hate Numbers, and today I'm going to be talking about a topic that's a very popular question I get asked, and it's all about VAT registration. More specifically, should you register for VAT, when must you register for VAT and how do you exactly go about it? For many of our clients,

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they ask us to do that process, but I'm going to give you a bit of a DIY overview, nevertheless.

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Now, if VAT is one of those taxes that makes your head hurt, then don't worry, you're not alone. And in this episode, I'm going to break it down step by step, and hopefully VAT will be less of a scary topic and you'll be more salted. So firstly, do you need to register for VAT? So let's start with the basics.

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The rules say you must register VAT if your taxable turnover goes over 90,000 pounds in any rolling 12-month period. Now, 90,000 pounds, by the way, is the current threshold limit for registration. It does change over time, and this is not just based on what your last accounts are saying. It's not just January through December.

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It's on a continual 12-month period. Now this applies whether you're a sole trader, a partnership, a CIC, or a limited company. And if you're based outside the UK, by the way, but you are selling goods or services to UK customers, then yes, you still need to register. Now, there is another indication, another trigger, and if you think your taxable turnover

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is likely to go over 90,000 pounds in the next 30 days, that's the trigger point for registration as well. Now, let's throw some numbers and an example into the mix. Let's assume Asif runs a Keep Fit studio. He starts his business in January, 2024. Now, by the time he gets to the end of December, 2024, his total turnover for those first 12 months is 80,000 pounds.

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No need to register in terms of being compulsory registered. Now he moves on a month and then he checks his turnover of February 24 to January 25, and his turnover is 82,000. Still nothing to do. Now, let's fast forward when he then looks at his figures in June 25 from July 24 up to and including June 25, he sees that it's gone over 90,000 pounds.

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Now that's the trigger point for registration. Now, if the assumption is that his turnover is not going to dip below that level, and if anything is going to rise, then he has to register for VAT. Now, the registration date will be once you go over that 90,000 pound threshold over that rolling 12-month period, you notify and have to be registered within 30 days.

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So his registration date will be essentially the 1st of August, 2025. Now, what counts as taxable turnover? Now, this is where it trips people up. Now, first of all, it has nothing to do with profitability. Profitability and VAT are two separate items. Now, taxable turnover for most people and most businesses covers the majority of what you sell.

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And in VAT world, turnover is divided into categories. Category one is what's called standard-rated goods. Category two is called reduced-rated goods, and there's another one, and that's zero-rated goods. Now, what doesn't get included in this determinational threshold are what are called outside of the scope or VAT-exempt items,

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Typically, things like insurance. If your income comes from donations, a pure, genuine donation with no benefit given, then that doesn't count as part of your turnover. Now, here's the catch, and this is what trips a lot of people up. Taxable turnover in VAT terms includes goods that you lend out, free gifts to customers, bartering services

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(yes, that does go on) where you are exchanging services between each other, reverse charge services from overseas. So typically, if you are engaging Google ads, that's typically dealt with under a reverse charge and that amount of spend on Google ads goes towards your turnover. Goods that you withdraw personally, that come out of your business stock

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and if you are in construction, any building work you do, over a hundred grand also counts. Now, as you go through each month, keep an eye on that turnover, tot it up and once you exceed that 90,000 threshold, that's the early warning radar sounded. Now what do we do if the deadline is missed? And that's not uncommon.

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Now if you do miss the deadline, typically that trips into trouble and trouble in the VAT world means that it’s likely to be penalties and interest and also some action points as well. So let's talk some deadlines. If your turnover crosses the threshold, you have that 30-day window to register from the end of that month.

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So if you hit your 90 grand during the month of June, you count it at the end of the month, you've got 30 days from there, and effectively your registration will be the 1st of August. Now, if you are in that situation, you've got a nice juicy contract, valued at 102,000. Even though that in itself you may not have got paid fully, you haven't reached 90,000 in the past, you expect to get that threshold crossed in the next 30 days,

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then you've got to register immediately. Scared of figures? Think accounting's a dark art? I Hate Numbers is your straight talking guide to business numbers and mindset. No jargon, no fluff. Just clarity. One reader said, brilliant to have on the bookshelf for whenever you need to demystify the world of numbers.

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Highly recommended. Check out Waterstone's, Amazon, and our website and show those numbers who’s boss.

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Now it is very likely, I've come across it too many times over the last 30 years that people do miss the deadline. Now, VAT will take the viewpoint, like most tax authorities that you should know what your obligations are. The fact you are busy, the fact that you are spinning lots of plates doesn't make any difference.

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You owe that from the day you should have been registered. And they have the option to charge interest and penalties. Now, it's likely that if you haven't been charging VAT, that you may have to put your hand in your pocket and actually pay the VAT that's due. Now there are options. Options are you can go back to your customers and recharge them the VAT.

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It becomes more challenging if you are selling business to consumer, B2C as you might call it. It becomes less of a challenge if you're doing business to business and the other business is VAT registered. The next part I want to look at is how do you actually go about the registration process? Well, the good news is registration is not as scary as it might sound.

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Firstly, go to gov.uk/register-for-vat. You will need a government gateway account and most businesses can register online. Obviously, you do have the option of talking to your accountant, dropping us a line, but the registration process is more form filling. There are some questions that are particularly head-scratching, and remember, if you're a sole trade or partnership, this is what you'll need.

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You'll need your NI number, your UTR or unique tax reference, photo ID like your passport, business bank details and the estimated turnover. And that's going forward, not retrospectively. They'll also want to know the date that you expect it to be registered from, but that's the key information you'll need when you start completing the process.

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Now, if you're a limited company, you'll need the company registration number, the company UTR. Again, that's the tax reference of the company. Again, estimate of the turnover and business bank account details. Now, if for any reason you don't have the bank account details, you can just say they're being applied for.

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Now you've also got to think about the special schemes and there are a few, so like flat-rate scheme. Make that decision. Again, I would advise strongly towards your accountant to actually find out what you need to do, and I would probably myself delegate that or outsource that job to somebody else. If you're comfortable, absolutely fine.

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Now, there is the option, if you want to circumvent this, to register early before you have to, and it's a voluntary VAT-registration process. Now your turnover might be not 90,000. You may think it's going to get to that 90,000 or you just want to register anyway. Now, there are good reasons to register voluntarily.

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If you sell zero-rated items like children's clothing, printed books, and your customers are VAT registered, you are charging no VAT, but you are reclaiming the input VAT. So let me just clarify that. If you're selling zero-rated items, like children's clothes or printed books, and your suppliers are VAT registered, you'll be claiming VAT back and you are likely to get cash coming back into the business.

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There's also the added bonus that the VAT registration makes your business look more established, more professional, and it focuses you on keeping good, decent records. And also it's a great way to start early, getting prepared for Making Tax Digital. So voluntary registration might give you money back from your costs,

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business credibility, digital compliance, and more of a sharp business focus to become more in touch with your numbers. Now beware. Once you are registered, you've got to charge VAT on all taxable supplies. So if your customers are not VAT registered, like individuals or businesses that aren't VAT registered, or charities, et cetera, then they cannot claim that VAT back and that 20% you've charged represents an additional cost to them.

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Now what I want to conclude with now is about staying compliant and keeping records. And keeping records is a great way, by the way, to give you insight, number insight into your business. You've got to keep detailed records of your sales and purchases. You've got to issue VAT invoices and compliance with the detail that's required.

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You've got to submit your VAT returns on time. You've got to use what's called MTD Compliance software. So packages like Xero, a personal favourite of mine and we are a Xero Platinum practice, is what I would recommend not only for VAT and bookkeeping, but it gives you so much insight to help running your business.

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Now bookkeeping is not just for the tax man, it gives you visibility and control. Now remember, claiming VAT back means you must have valid VAT invoices for your expenses. No invoice, no reclaim. So, let's wrap this up. So what have we actually gone through, what have we highlighted today? VAT registration is required

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once your turnover has hit a 90,000, any 12 month window. Look at it as a rolling 12-month process. You've got to register within 30 days of going over that limit. If you hit the threshold in the next 30 days, you've got to register straight away. You've got to understand what counts towards your taxable turnover and what doesn't.

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You can, you do have the option of registering voluntarily. Sometimes that's a real smart move. Late registration, like anything in tax means costs, paying back the tax and penalties. And use good digital tools like Xero to stay on top of things. Now, if you need help, I've got you. And if it feels overwhelming, you are by no means alone.

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And that's one of the reasons I wrote I Hate Numbers, the book that cuts through the fog. It’s packed with straight talking tips, real life examples, and no jargon. Check out the show notes to get your copy of this wonderful book. Those aren't just my words, by the way. Now, if you need one-to-one help book a 15-minute call – it’s free.

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I'll talk you through the rules, the registration, and what's right for your business. And remember the golden motto. Plan it. Do it & Profit!