VAT registration: when and why (UK)

VAT registration is one of those milestones that can feel like a “big business moment”… right up until you realise it also means new admin, new deadlines, and new rules.

Here’s a plain-English look at when VAT registration is required, when it might be helpful to register voluntarily, and what to think about before you decide.

When do you have to register for VAT?

In the UK, you must register for VAT if your VAT taxable turnover goes over HMRC’s registration threshold (measured over a rolling period).

• HMRC’s threshold can change. As a reference, it has been £85,000 in recent years — but always check the current figure.
• Turnover can creep up gradually or spike quickly (for example after a big contract), so it’s worth monitoring monthly.

Practical tip: keep a simple “last 12 months sales” running total. It makes the threshold much easier to track.

Voluntary VAT registration: when might it make sense?

You can sometimes register before you reach the threshold. Reasons businesses consider this include:

• Credibility: some customers expect suppliers to be VAT registered.
• Reclaiming VAT on costs: useful if you buy a lot of VAT-able supplies.
• Planning ahead: avoids a sudden “oh no” moment when growth accelerates.

Voluntary registration is not automatically “better” — it depends on your pricing, customers, and costs.

The practical trade-offs

1) Can you put prices up?

If your customers are not VAT registered (for example, many members of the public), adding VAT can make you look more expensive unless you absorb it.

If your customers are VAT registered, they may be able to reclaim VAT — so VAT often matters less to them.

2) What scheme will you use?

VAT schemes can change how and when VAT is due.

Examples you may hear about:

• standard VAT accounting
• cash accounting
• flat rate scheme (where available)

Choosing a scheme is not something to guess. The “best” scheme depends on what you sell, your costs, and your cashflow.

3) Making Tax Digital (MTD)

Most VAT-registered businesses need to:

• keep digital records
• submit VAT returns using MTD-compatible software

If you’re currently using spreadsheets, it doesn’t mean you can’t manage VAT — it just means you need a tidy workflow that meets the digital record requirements.

4) Admin, deadlines, and record-keeping

VAT is often a quarterly rhythm. The trick is doing small amounts regularly rather than a huge catch-up every quarter.

A healthy VAT routine usually includes:

• reconciling the bank
• checking VAT codes
• keeping proper VAT invoices/receipts
• saving a “quarter folder” of reports and evidence

A quick checklist before you decide

• Who are your customers (VAT registered or not)?
• Will VAT affect your pricing or competitiveness?
• Do you have regular VAT-able costs you’d want to reclaim?
• Are your records consistent enough to submit confidently?
• Would a short VAT “health check” reduce your risk?

Disclaimer

This article is general information, not tax advice. VAT rules and thresholds can change, and the right approach depends on your circumstances (including what you sell, who you sell to, and which scheme you use). If you’re unsure, check the latest HMRC guidance or get tailored advice.

If you’re approaching the VAT threshold (or thinking about registering voluntarily), ClearMethods can help you get your records VAT-ready and choose a workflow that won’t take over your life.