Everything You Need To Know About The VAT Registration Threshold
When you have your own business, there’s plenty of admin bits to consider and keep track of – VAT registration is just one of them.
Registering for VAT is crucial to ensure your business stays compliant. However, not everyone needs to do it, as the threshold set out by HMRC is based on income. When businesses cross over the threshold, they then need to register for VAT.
To make sure you know exactly when your business is liable for VAT, we’ll explore what the VAT threshold is, how to register for VAT, and what could happen if you forget.
What is the VAT Registration Threshold?
The VAT registration threshold is the amount of money you can earn within a 12-month rolling period before needing to register for VAT.
In the UK, the tax registration threshold is set at £90,000 for the 2025/26 tax year. As such, if you earn equal to or more than this figure across the year, you need to register to pay VAT. The threshold is currently frozen, meaning it won’t change before April 1, 2026.
Keep up to date on the latest VAT rules, guidelines, and regulations on the HMRC website. This is the best way to ensure your business is always compliant.
What Do I Need to Do Once I Meet the Threshold?
If your taxable income goes over the £90,000 threshold within 12 months, you must register to pay VAT with HMRC. Plus, if you believe your income will go over this within 30 days, you must register.
What Happens If I Forget to Register For VAT Once Passing the Threshold?
If your business goes over the threshold, you must tell HMRC. Failure to do so can land you with financial penalties.
There are late registration penalties to consider. These are calculated as a percentage of the net VAT due, with the amounts increasing depending on how late you notify HMRC. You can expect the following late penalties:
- 9 Months Late: You’ll be charged an additional 5% of the total net VAT due.
- 9 – 18 Months Late: You’ll be charged an additional 10% of the total net VAT due.
- More than 18 Months Late: You’ll be charged 15% of the total net VAT due.
A minimum penalty of £50 applies to all missed VAT registration cases. You may also end up with backdated VAT bills, meaning you need to pay all the VAT that should have been paid from the date you went over the threshold.
Consistently failing to register your business when it goes over the threshold can lead to an HMRC investigation, potentially damaging your business’s reputation, credit rating, and success.
Should I Still Register for VAT If I Am Below the Threshold?
Yes, you can still register for VAT if your business is below the current threshold. In fact, there are benefits to doing so. Once you register for VAT, you can access a range of potential benefits for your business, including:
- Reclaim on Expenses: Once you’ve registered for VAT, you can start reclaiming it back on select eligible business expenses. For example, office and equipment costs, travel expenses, or any petrol used for business purposes.
- Backdate Reclaims: You can reclaim tax on certain purchases made as far back as four years before your registration*. For services, you can backdate up to six months prior to registration.
- Improve Business Credibility: For businesses dealing with clients or suppliers, registering for VAT can make you seem more professional, established, and credible. In fact, certain businesses won’t work with those who aren’t VAT registered.
- Avoid Late Penalties: The last thing you want is to incur late penalties by forgetting to register for VAT once your business exceeds the threshold. Registering now means you don’t have to worry about any of that.
*There are rules and regulations on what can and cannot be reclaimed about registration. Always refer to the HRMC website for full, up-to-date information.
What Details Do I Need to Register for VAT?
Before you sit down to fill out the registration form, it’s handy to know exactly what details you’ll need, so you can keep them to hand.
If you’re a limited company, you’ll need the following information:
- Your company registration number
- Details for your business bank account
- Figures for your annual turnover
- Your Unique Taxpayer Reference (UTR)
If you’re an individual or a partnership, you’ll need the following details:
- Your National Insurance Number
- ID, such as your driver’s licence or passport
- Your UTR, not required if you don’t have one
- Details of your annual turnover
- Your bank account details
Plus, you may also need additional information on your self-assessment return, payslips, and a P60 to hand as well.
How Do I Register for VAT?
Registering for VAT may seem daunting, especially if you haven’t done it before. Let’s go through the steps together, so you know exactly what to expect.
Step 1: Log In
First things first, you need to log in to your Government Gateway account using your username and password. If you don’t have one, then simply create one via the sign-in page before logging in.
Step 2: Go to ‘Get Another Tax, Duty or Scheme’
Now you’re logged in, look for the ‘get another tax, duty or scheme’ section on the page. Found it? Go ahead and click the button.
Step 3: Select ‘VAT’
Once you’ve clicked the ‘get another tax, duty or scheme’ button, all you need to do is select ‘VAT’ to get started with the registration process.
Step 4: Fill Out the Registration Form
Start filling out the form, making sure to answer all the questions accurately to the best of your knowledge. Certain details can be changed via your online account after you’ve registered and received a VAT number, but it’s best to get it right the first time.
Step 5: You’re Registered!
And you’re all done! You should now be fully VAT registered. You don’t need to fill out your VAT registration all at once. So, if you need to, you can save your progress and complete it at a later date. However, if you do this, make sure you don’t forget to come back.
DH Business Support Makes Managing Your Taxes Simple
Here at DH Business Support, we make it our business to help you take care of your business.
Our team has over 15 years of experience in providing dedicated, expert tax solutions to businesses across the globe. Whether it’s ensuring you’re registered for VAT in time, helping with bookkeeping, or just providing general tax advice, we’re here for you.
Reach out to us today to see how we can help you. You can give us a call on 0330 088 1701 or send us an email to hello@dhbusinesssupport.com. Alternatively, fill out our online form to enquire about our services.
Looking for further guidance on VAT and tax? Discover what influencers can claim on tax or whether charities need to pay tax, over on our blog.