When you must register for VAT
You must register for VAT with HMRC when your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (2024/25 threshold), or you expect it to exceed that in the next 30 days. You can also register voluntarily below the threshold — useful if most of your customers are VAT-registered businesses.
Standard, reduced and zero rates
- Standard rate (20%) — most goods and services
- Reduced rate (5%) — domestic fuel, children's car seats, some energy-saving installations
- Zero rate (0%) — most food, children's clothing, books, public transport
- Exempt — insurance, finance, education, health services (no VAT charged, no input VAT recoverable)
Choosing a VAT scheme
- Standard Accounting — account for VAT on invoice date
- Cash Accounting — account for VAT when payment is received/made (turnover up to £1.35m)
- Flat Rate Scheme (FRS) — pay a fixed % of gross turnover (turnover up to £150k); simpler but limited input VAT recovery
- Annual Accounting — one return per year with interim payments
Making Tax Digital (MTD)
All VAT-registered businesses must keep digital records and file returns using MTD-compatible software (Xero, QuickBooks, and other HMRC-approved platforms). Spreadsheets are allowed only with bridging software.
Common mistakes
- Reclaiming VAT on entertainment of UK clients (not allowed)
- Forgetting to apply reverse charge VAT on services bought from EU/overseas suppliers
- Missing the registration threshold by ignoring rolling 12-month turnover
- Late filing — surcharges and points-based penalties apply from the first late return
Need help choosing the right scheme? Book a free consultation and we'll walk through your numbers.