VAT Registration in the UK: Threshold, Process & What It Means for Your Business

What is VAT?

VAT is a consumption tax applied at each stage of the supply chain. As a VAT-registered business, you charge VAT (output tax) on your sales and reclaim VAT (input tax) on eligible business purchases. The difference is paid to HMRC, typically quarterly.

The standard rate is 20%. A reduced rate of 5% applies to certain goods and services (such as domestic energy), and some supplies are zero-rated (books, children's clothing, most food) or exempt (financial services, insurance).

The VAT Registration Threshold (2025)

You must register for VAT if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (not the tax year — a rolling 12-month window). You must register within 30 days of the end of the month in which you exceeded the threshold.

You can also register voluntarily if your turnover is below the threshold. Voluntary registration makes sense if you sell predominantly to VAT-registered businesses (they can reclaim the VAT you charge) or if you have significant input VAT to reclaim.

How to Register for VAT

VAT registration is done online through HMRC's VAT Registration Service. You will need your company's UTR, Companies House number, bank details, and information about your business activities. Once registered, HMRC will issue your VAT registration number (which starts with GB) and your effective date of registration.

VAT Accounting Schemes

HMRC offers several simplified VAT accounting schemes for small businesses:

• Standard VAT Accounting: Account for VAT on each invoice issued and received. Most common scheme.
• Cash Accounting Scheme: Only account for VAT when payment is received/made. Useful for businesses with slow-paying customers. Available to businesses with expected taxable turnover up to £1.35m.
• Flat Rate Scheme: Pay a fixed percentage of gross turnover to HMRC instead of calculating input and output VAT separately. Simpler administration. Available up to £150,000 VAT-exclusive turnover.
• Annual Accounting Scheme: Submit one VAT return per year instead of quarterly, with advance payments. Available up to £1.35m.

VAT Return Deadlines

VAT returns are typically filed quarterly. You must submit your VAT return and pay any VAT owed within one month and seven days after the end of each VAT quarter. For example, if your VAT quarter ends 31 March, the return and payment are due by 7 May.

Since the introduction of Making Tax Digital (MTD) for VAT, all VAT-registered businesses must keep digital VAT records and file using MTD-compatible software.

Reclaiming Input VAT

One of the key benefits of VAT registration is the ability to reclaim VAT paid on business expenses. You can reclaim input VAT on most business purchases if you have a valid VAT invoice. You cannot reclaim VAT on business entertainment, vehicles that are also used privately, or goods/services used exclusively for exempt activities.