VAT Registration: When and How to Register

When Must You Register for VAT?

VAT registration is compulsory when your business’s taxable turnover exceeds the registration threshold. For 2024/25, the threshold is £90,000.

You must register in two situations:

Historic Turnover Test

At the end of any month, if your total taxable turnover for the previous 12 months has exceeded £90,000, you must register. You have 30 days from the end of that month to notify HMRC, and your registration takes effect from the first day of the second month after the threshold was crossed.

Future Turnover Test

If at any point you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately. The registration takes effect from the beginning of that 30-day period.

What Counts as Taxable Turnover

Taxable turnover includes the total value of supplies that are:

• Standard-rated (20%)
• Reduced-rated (5%)
• Zero-rated (0%)

It does not include:

• Exempt supplies (such as financial services, insurance, or education)
• Sales of capital assets
• Income from outside the scope of VAT (such as dividends or wages)

Voluntary Registration

Even if your turnover is below the threshold, you can voluntarily register for VAT. This can be beneficial if:

• You sell mainly zero-rated goods (such as food or children’s clothing) and want to reclaim input VAT
• Your customers are VAT-registered businesses that can reclaim the VAT you charge
• You make significant purchases with VAT that you want to reclaim
• You want your business to appear more established and professional

Disadvantages of Voluntary Registration

• You must charge VAT on your sales, which increases prices for non-VAT-registered customers
• You must comply with Making Tax Digital requirements
• You must file VAT returns regularly
• Additional administrative burden of maintaining VAT records

How to Register

Online Registration

Most businesses register through the HMRC online services portal. You will need:

• Your business details (name, address, legal structure)
• National Insurance number or Unique Taxpayer Reference
• Details of your business activities and expected turnover
• Bank account details for VAT refunds and direct debit payments
• The date your turnover exceeded the threshold (or the date you want voluntary registration to start)

When Registration Is Effective

What Happens After Registration

Once registered, HMRC issues your:

• VAT registration number (a 9-digit number prefixed with GB)
• VAT certificate (form VAT4)
• VAT return dates — your quarterly filing periods

You must start charging VAT from your effective date of registration, even if you have not yet received your VAT number. Invoices issued before receiving your number can be reissued once it arrives.

Group VAT Registration

Companies under common control can apply for group VAT registration. This means:

• One company is nominated as the representative member and files a single VAT return for the group
• Supplies between group members are disregarded for VAT purposes
• The group shares a single VAT registration number

Group registration simplifies administration but makes all group members jointly and severally liable for any VAT debt.

Registration for Distance Selling

If you sell goods online to consumers in the UK from overseas, you may need to register for UK VAT. The rules depend on the value and nature of the goods and whether you use an online marketplace that accounts for VAT on your behalf.

Penalties for Late Registration

If you fail to register on time, HMRC charges a failure to notify penalty. The penalty depends on the amount of VAT that should have been charged from the date registration was required and whether the failure was:

You must also account for VAT on all taxable supplies made from the date registration should have taken effect. This means you either absorb the VAT cost or contact customers to collect the VAT retrospectively.

VAT Deregistration

You can deregister from VAT if your taxable turnover falls below the deregistration threshold of £88,000 (2024/25) and you do not expect it to exceed £90,000 in the next 12 months.

Compulsory deregistration occurs when you:

• Stop making taxable supplies
• Cease trading altogether
• Transfer the business as a going concern

When you deregister, you may need to account for VAT on stock and assets on hand at the deregistration date, unless the total VAT on these items is less than £1,000.

Exemption from Registration

In limited circumstances, you can apply for exemption from registration even if your turnover exceeds the threshold. This is possible if HMRC is satisfied that your taxable turnover will drop below the deregistration threshold (£88,000) in the next 12 months — for example, if you had a one-off large contract.

After Registration: Key Obligations

Once VAT-registered, you must:

• Charge VAT on all taxable supplies at the appropriate rate
• Issue valid VAT invoices for sales to other VAT-registered businesses
• Submit VAT returns on time (usually quarterly)
• Keep digital records under Making Tax Digital
• Pay any VAT owed to HMRC by the deadline
• Keep VAT records for at least 6 years

Your accounting system must be capable of recording VAT on sales and purchases and producing the figures needed for your VAT return.

Pre-Registration VAT Recovery

After registering, you can reclaim VAT on certain purchases made before your registration date:

This can produce a significant refund on your first VAT return, particularly if you purchased stock, equipment, or received professional services before registering.

Interaction with Other Taxes

VAT registration is separate from other tax registrations. A private limited company must separately register for corporation tax , PAYE , and VAT. Sole traders register for VAT in addition to self-assessment .

The tax-deductible expenses you claim for income tax or corporation tax are recorded net of VAT if you are VAT-registered (since you reclaim the VAT separately). If you are not VAT-registered, the gross amount including VAT is the deductible cost.