When and how to register for VAT

VAT registration is compulsory when taxable turnover in any rolling 12-month period exceeds £90,000 — and 'rolling' is the word that catches people. At the end of every month, look back exactly 12 months; if that window's total crossed £90,000, the clock is running: you must register within 30 days of the end of the month you crossed.

The cost of missing it

Register late and you owe VAT from the date you should have registered — on sales where you never charged it. That's up to 20% of months of revenue, paid from your margin, plus a lateness penalty scaled to how overdue you are. It's among the most expensive routine mistakes a growing business can make, and it's entirely preventable by watching the rolling window.

There's also a forward-looking test: if you expect taxable sales over £90,000 in the next 30 days alone (a big contract, say), registration is immediate.

Choosing a scheme

• Standard: charge VAT, reclaim input VAT, file quarterly. Default for most.
• Flat rate: pay a fixed percentage of turnover, keep the difference from what you charge; simpler, sometimes profitable for low-cost service businesses — but 'limited cost trader' rules cut the benefit for many.
• Cash accounting: account for VAT when money moves, not when invoices are raised — a cash-flow lifesaver if customers pay slowly.
• Annual accounting: one return a year with instalments; fits stable, predictable businesses.

Voluntary registration

Below the threshold, registering can still pay: you reclaim VAT on costs, and B2B customers don't care about the VAT on your invoices (they reclaim it). Sell to the public, though, and registration makes you 20% dearer or 17% poorer — so the answer depends on who your customers are. This is a ten-minute analysis with your numbers; we do it as part of VAT registration (£79 fixed).

Registration itself is done online with HMRC, takes effect from the date set, and brings Making Tax Digital duties: digital records and returns filed through compatible software. Our VAT service handles registration, scheme choice, software and every quarterly return from £35/month.