File VAT Return

You must register for VAT if either applies:

• Rolling 12-month test: your VAT-taxable turnover (everything you sell that’s standard, reduced or zero-rated) exceeds £90,000 in any rolling 12-month period. It’s not tied to the tax year, check the last 12 months every month.
• Next-30-days test: you expect your VAT-taxable turnover to go over £90,000 in the next 30 days alone (e.g. a large contract).

Once you know you’ve crossed (or will cross) the line, you’ve got 30 days to tell HMRC. Your effective date of registration (EDR) will be set by HMRC; from that date you must charge VAT and keep VAT records.

What counts towards the threshold?

• Counts: standard-rated sales (20%), reduced-rated (5%), zero-rated (0%), most UK services.
• Doesn’t count: exempt supplies (e.g. many financial, insurance, health and education services), outside-scope income (e.g. some grants/dividends), and sales of capital assets don’t count for the threshold (though they may have VAT consequences).
• Overseas businesses: if you’re not established in the UK and make any UK-taxable supplies, there is no threshold, you generally register immediately.
• Multiple activities: HMRC looks at the whole business. Splitting similar activities between entities to dodge the threshold (“disaggregation”) can be challenged.

The difference between zero-rated and exempt

• If all your supplies are zero-rated, you can register (and reclaim input VAT) or apply for an exemption from registration.
• If all your supplies are exempt, you can’t register (partial exemption rules apply if you have a mix of taxable and exempt sales).

Yes. Registering below £90,000 can make sense if:

• You mainly sell B2B to VAT-registered customers (they can reclaim your VAT).
• You’ve got significant input VAT on startup or capital costs to reclaim.
• You want the credibility of a VAT number.

If you briefly cross £90,000 but can evidence that the next 12 months will be below the deregistration threshold (currently £88,000), you can ask HMRC for an exception from registration. If HMRC refuses, you’ll be registered from the date you should have been.

1. Get your details ready: UTR (or NI number if you’re a sole trader), business bank details, legal structure, a short business activity description, and the date you crossed (or will cross) the £90,000 rolling 12-month taxable-turnover threshold. If you only went over briefly, you can apply for an exception
2. Apply: Register online via your Government Gateway (or by post on form VAT1 if HMRC requires it for your situation). HMRC will confirm your VAT number and effective date of registration (EDR).
3. From your EDR: you must account for VAT on sales from that date. While you’re waiting for your number you can’t show VAT on invoices, increase prices to cover VAT, then re-issue invoices once your number arrives.
4. MTD: HMRC will sign you up to Making Tax Digital for VAT (unless exempt). Keep digital VAT records and submit returns using MTD-compatible software.
5. Reclaim pre-registration VAT (if eligible): goods bought in the last 4 years that you still have, and services from the last 6 months. Keep invoices/stock evidence and only reclaim the business element.
6. Know the thresholds: compulsory registration at £90,000; you can usually de-register at £88,000 (NI: £90,000).

1. Charge the right rate (standard/reduced/zero) and issue VAT invoices.
2. Reclaim input VAT on business costs (watch for partial exemption if you have exempt income).
3. File VAT Returns (usually quarterly) and pay/refund the difference between output VAT (you charge) and input VAT (you incur).
4. Keep digital records and preserve them for at least 6 years.

All VAT-registered businesses must:

• Keep digital VAT records, and
• Submit VAT Returns via MTD-compatible software (spreadsheets alone aren’t enough unless linked by digital “bridges”).

• If you register late, HMRC will charge VAT from your EDR (even if you didn’t add it to invoices) and may add penalties/interest.
• Forgetting the rolling test: check the last 12 months every month, not just year-end.
• Zero-rated vs exempt confusion: zero-rated counts toward the threshold; exempt doesn’t.
• Back-billing customers: if you didn’t charge VAT from your EDR, you may have to absorb it. Plan early to avoid margin hits.