What is the VAT registration threshold in the UK?

The VAT registration threshold is £90,000 in taxable turnover over a rolling 12-month period. Once your turnover exceeds this, you must register with HMRC.

Can I register for VAT voluntarily?

Yes. You can register voluntarily even if your turnover is below the threshold. Many businesses choose this to reclaim VAT on purchases or to improve their professional image.

How often do I have to file VAT returns?

Most businesses file VAT returns quarterly, but some schemes allow monthly or annual submissions.

What is the difference between the Flat Rate Scheme and Cash Accounting Scheme?

The Flat Rate Scheme allows you to pay a fixed percentage of your turnover as VAT, simplifying calculations. The Cash Accounting Scheme lets you pay VAT when your customers pay you, improving cash flow.

Can I switch between VAT schemes?

Yes, you can switch schemes if you meet the eligibility requirements. This can help you adapt to changes in turnover, cash flow, or administrative capacity.

What happens if I don't register for VAT on time?

Late registration can result in penalties, interest, and backdated VAT charges from the date you should have registered.

VAT Registration: Complete Guide to Registering and Choosing the Right VAT Scheme in the UK

VAT

13 Aug

Written By The Online Accountants

We explain the VAT thresholds, how to register, accounting schemes, choosing the right scheme and post-registration responsibilities.

Duck discussing vat registration with a large vat cat dressed in a blue suit.

How to Register for VAT and Help with Scheme Selection

1. Introduction

Value Added Tax (VAT) is a cornerstone of the UK tax system — and for many businesses, registering for VAT is an important legal and financial milestone. Whether you’re a start-up that’s just hit the turnover threshold, an established business looking to reclaim VAT on expenses, or a sole trader considering voluntary registration for credibility, understanding VAT registration is essential.

This guide covers everything you need to know:

When and how to register for VAT.
The key differences between compulsory and voluntary registration.
The full range of VAT accounting schemes in the UK — and which may be best for your business.
Post-registration obligations, including Making Tax Digital (MTD) compliance.
Expert tips and examples to help you make informed decisions.

The aim? To give you clear, practical, and HMRC-aligned information so that you can register with confidence and manage VAT efficiently.

2. What is VAT Registration?

Understanding VAT

VAT is a consumption tax charged on most goods and services sold in the UK. Businesses collect VAT from customers and pay it to HMRC, while being able to reclaim VAT they’ve paid on business-related purchases.

VAT Rates in the UK

As of the 2025/26 tax year:

Standard rate – 20% (most goods and services).
Reduced rate – 5% (e.g., domestic fuel, certain energy-saving materials).
Zero rate – 0% (e.g., most food, children’s clothes, books).
Exempt – No VAT charged and no right to reclaim related VAT (e.g., postage stamps, financial services, certain education services).

Compulsory vs Voluntary Registration

Compulsory registration occurs if:

Your taxable turnover exceeds the VAT registration threshold (£90,000) over the past 12 months.
You expect turnover to exceed £90,000 in the next 30 days alone.
You acquire goods worth more than £90,000 from an EU country (post-Brexit, this applies to Northern Ireland for goods).
You take over a VAT-registered business.

Voluntary registration is allowed if turnover is below the threshold but you choose to register, often to:

Reclaim VAT on purchases.
Improve credibility with VAT-registered suppliers and clients.
Avoid reaching the threshold unexpectedly.

Key Consideration: Voluntary registration can increase admin and cash flow complexity, so weigh the benefits carefully.

3. VAT Registration Process

Eligibility and Thresholds

UK-established businesses: Must register if taxable turnover exceeds £90,000.
Overseas businesses: Must register immediately if making taxable supplies in the UK — no threshold applies.
Northern Ireland: Separate EU goods acquisition threshold rules apply.

Step-by-Step VAT Registration

Step 1: Prepare Your Information

Business details (name, address, contact).
Bank account details.
Business activity description.
Turnover figures for the last 12 months.
Expected turnover for the next 30 days (if registering early).

Step 2: Apply Online

Most businesses register via the HMRC VAT online service.
You’ll need a Government Gateway ID.

Step 3: Complete the VAT1 Form

The online version is standard, but some specialist cases require paper VAT1 (e.g., registering a group or division).

Step 4: Receive Your VAT Certificate

Usually issued within 30 working days.
Includes VAT number, effective date, and filing details.

Effective Date of Registration

Usually the first day of the month after you exceed the threshold.
Can be earlier if you apply voluntarily.

After Registration

Start charging VAT from the effective date.
Include VAT number on invoices.
File returns and keep digital records via MTD-compliant software.

4. Post-Registration VAT Obligations

Once registered, you must:

Charge VAT at the correct rate.
Issue VAT-compliant invoices.
File VAT returns on time (usually quarterly).
Pay any VAT due to HMRC.
Keep records for at least 6 years, including invoices, receipts, and VAT account records.
Use Making Tax Digital software for record-keeping and filing.

Penalties: Late registration, late filing, and late payment can result in surcharges, interest, and fines.

5. Overview of VAT Accounting Schemes

Choosing the right scheme can simplify VAT, improve cash flow, and reduce admin.

5.1 Standard VAT Accounting Scheme

Default method: charge VAT on sales (output tax) and reclaim VAT on purchases (input tax) in the period they occur.
File quarterly or monthly VAT returns.
Best for: businesses with steady cash flow and no major bad debt issues.

5.2 Flat Rate Scheme (FRS)

For businesses with turnover ≤ £150,000 (excl. VAT).
Pay a fixed percentage of gross turnover to HMRC; keep the difference between VAT charged and paid.
Cannot reclaim VAT on purchases (except large capital assets).
Best for: service-based firms with low VAT costs.

5.3 Cash Accounting Scheme

For turnover ≤ £1.35 million.
Pay/reclaim VAT when customers pay invoices, not when issued.
Improves cash flow if clients pay late.
Best for: businesses with long payment terms.

5.4 Annual Accounting Scheme

For turnover ≤ £1.35 million.
Make advance VAT payments, submit only one return per year.
Best for: predictable turnover, low admin capacity.

5.5 VAT Retail Schemes

Designed for retailers selling many low-value items.
Simplifies VAT calculation.
Options: Point-of-Sale, Apportionment, Direct Calculation.
Best for: shops, cafés, and similar outlets.

5.6 VAT Margin Scheme

Applies to second-hand goods, antiques, and collectibles.
VAT is charged only on profit margin, not full sale price.
Best for: resellers.

6. How to Choose the Right Scheme

  
      Scheme
      Turnover Limit
      Main Benefit
      Best For
      Downsides
    

  
      Standard VAT Accounting
      No limit
      Full VAT reclaim on purchases
      All businesses
      More administrative work
    

      Flat Rate Scheme
      £150,000 (excluding VAT)
      Simplified VAT calculation
      Service-based firms with low VAT costs
      Limited ability to reclaim VAT on purchases
    

      Cash Accounting Scheme
      £1.35 million
      Aligns VAT payments with cash flow
      Businesses with late-paying clients
      Cannot reclaim VAT until supplier invoices are paid
    

      Annual Accounting Scheme
      £1.35 million
      Fewer VAT returns and predictable payment schedule
      Small, steady turnover businesses
      Less frequent VAT reclaims, potential over/under-payments
    

      VAT Retail Schemes
      No limit
      Simple VAT on many small sales
      Retailers, cafés, and similar outlets
      Complex to set up and manage correctly
    

      VAT Margin Scheme
      No limit
      VAT charged only on the profit margin
      Second-hand goods dealers, antique traders
      Strict record-keeping, not available for goods bought with VAT charged
    

Scheme	Turnover Limit	Main Benefit	Best For	Downsides
Standard VAT Accounting	No limit	Full VAT reclaim on purchases	All businesses	More administrative work
Flat Rate Scheme	£150,000 (excluding VAT)	Simplified VAT calculation	Service-based firms with low VAT costs	Limited ability to reclaim VAT on purchases
Cash Accounting Scheme	£1.35 million	Aligns VAT payments with cash flow	Businesses with late-paying clients	Cannot reclaim VAT until supplier invoices are paid
Annual Accounting Scheme	£1.35 million	Fewer VAT returns and predictable payment schedule	Small, steady turnover businesses	Less frequent VAT reclaims, potential over/under-payments
VAT Retail Schemes	No limit	Simple VAT on many small sales	Retailers, cafés, and similar outlets	Complex to set up and manage correctly
VAT Margin Scheme	No limit	VAT charged only on the profit margin	Second-hand goods dealers, antique traders	Strict record-keeping, not available for goods bought with VAT charged

7. Advanced Considerations

Non-UK businesses: Must register immediately for UK VAT if supplying here.
Digital services: Must charge UK VAT to UK customers.
Group VAT Registration: Multiple companies can register as one entity to simplify VAT.
Changing schemes: Allowed if still eligible — can be strategic for cash flow or admin.

8. Expert Tips

Review VAT position annually — turnover changes can trigger compulsory registration or scheme ineligibility.
Keep VAT records organised from day one.
Use MTD-compliant software (Xero, QuickBooks, Sage, FreeAgent).
Seek professional advice for imports/exports and cross-border sales.

9. Frequently Asked Questions

Q: What is the VAT registration threshold?

A: £90,000 taxable turnover in a 12-month period.

Q: Can I register voluntarily?

A: Yes, and it can allow VAT recovery, but adds admin.

Q: How often do I file VAT returns?

A: Usually quarterly, sometimes monthly or annually depending on scheme.

Q: Can I switch schemes?

A: Yes, if still eligible.

Q: What happens if I don’t register on time?

A: You may face penalties, interest, and back-dated VAT charges.

10. Conclusion

VAT registration is more than a compliance box to tick — it’s a decision that can affect cash flow, credibility, and profitability. By understanding when to register, how to do it, and which VAT accounting scheme fits your business, you can stay compliant and avoid unnecessary admin headaches.

Next step:

✅ Check your turnover against the VAT threshold.

✅ Compare VAT schemes to find the most efficient.

✅ Register via HMRC’s online service or speak to a qualified accountant.

VAT RegistrationVAT SchemesVAT Thresholds

The Online Accountants