What is VAT?
Value Added Tax (VAT) is a tax added to most goods and services sold in the UK. VAT-registered businesses charge it on their sales, reclaim it on qualifying purchases, and pay the difference to HMRC.
Do you need to register?
You must register for VAT once your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period, not just your accounting year, or if you expect to exceed it in the next 30 days alone. You can also register voluntarily below this threshold, which can be worthwhile if your customers are mainly VAT-registered businesses able to reclaim the VAT you charge them.
VAT rates
- Standard rate (20%): most goods and services
- Reduced rate (5%): certain items, such as home energy and some health and mobility products
- Zero rate (0%): certain items including most food and children’s clothing, still counted as taxable supplies
Some supplies are exempt or entirely outside the scope of VAT, which is treated differently from zero-rating and affects what you can reclaim.
Once you are registered
A VAT-registered business must charge the correct VAT on its sales, keep proper VAT records, submit VAT returns (usually quarterly) through Making Tax Digital-compatible software, and pay any VAT owed to HMRC by the due date.
VAT schemes worth knowing about
- Flat Rate Scheme: available if your VAT-taxable turnover is under £150,000, simplifying VAT reporting by applying a fixed percentage to your turnover rather than tracking VAT on every purchase.
- Cash Accounting Scheme: account for VAT when you are actually paid and when you pay your suppliers, rather than on invoice dates, which can help with cash flow.
- Annual Accounting Scheme: submit one VAT return a year with regular advance payments, reducing administration.
How MLA Chartered Accountants can help
We advise on whether and when to register, help you pick the right scheme for your business, and handle your VAT returns so you stay compliant and avoid surprises.