How VAT Can Affect You
VAT, or Value Added Tax, is a type of tax that businesses add to the price of most goods and services they sell. In the UK, this tax is collected by businesses on behalf of HMRC. It is usually added at a rate of 20%, though some items have lower rates (5% or 0%), and a few are even exempt.
If your business is VAT registered, you must charge VAT when selling to customers, and in return, you can claim back VAT on most things your business buys. This makes VAT an important part of running a business if your sales reach a certain level, whilst adhering to HMRC compliance.
Thresholds for VAT
You must register your business for VAT if your total taxable turnover is more than £90,000 over a rolling 12-month period. This means you need to keep an eye on your sales regularly, not just at the end of the year.
Even if you haven’t gone over the threshold yet, you must also register if you know your turnover will go over £90,000 in the next 30 days.
Some businesses choose to register for VAT even if they don’t need to – this is called voluntary registration, and in some cases, it can save you money or make your business look more professional.
What Happens When You Become VAT Registered?
Once you are VAT registered, you will receive a VAT number and need to include it on your invoices. You must start charging VAT on most of the things you sell (unless they’re exempt), and you can reclaim VAT on your business purchases.
You’ll also have to send VAT returns to HMRC – usually every 3 months. These returns show how much VAT you’ve charged your customers and how much you’ve paid to other businesses. If you’ve charged more than you’ve paid, you’ll send the difference to HMRC. If you’ve paid more than you’ve charged, you can claim the difference back.
The Benefits of VAT
There are some good reasons to register for VAT, even if you don’t have to yet:
You can claim back VAT on many of your business costs, which can help you save money.
It makes your business look more professional, especially if you deal with other VAT-registered businesses.
You can choose a VAT scheme that might suit your business, such as the Flat Rate Scheme or Annual Accounting, to make things easier.
Tasks Associated with VAT
Once you're VAT registered, there are a few regular tasks you’ll need to keep on top of:
Charging the correct amount of VAT on your sales
Giving proper VAT invoices to your customers
Keeping clear and accurate records of what you sell and buy
Filing VAT returns, usually every three months
Paying VAT to HMRC, or claiming it back if you're owed money
If you’re using accounting software, it needs to follow the rules for Making Tax Digital (MTD), which means keeping digital records and filing returns online.
How We Can Help
VAT can feel confusing and time-consuming, especially when you’re busy running a business. That’s where we come in.
Our friendly and experienced team can help with everything related to VAT, including:
Checking if and when you need to register
Helping you register for VAT quickly and correctly
Choosing the right VAT scheme for your business
Preparing and submitting your VAT returns on time
Making sure your records are in good order for Making Tax Digital
Advising you if HMRC ever has questions or wants to do a check
We’ll make sure everything is done properly, so you don’t have to worry.
Get in touch today and let us take care of VAT, while you take care of your business.