What is the VAT registration threshold for small businesses?

This guide will cover:

• the current VAT threshold
• how to work out taxable turnover
• how to register for VAT
• when to register for VAT

What is the VAT threshold 2023?

In the UK, the VAT threshold for 2023 is £85,000.

The VAT registration threshold is set by HMRC every year. However, it’s been £85,000 since 2017-2018, and the government has confirmed that this threshold won’t change until 31 March 2024.

In the UK, you must register for VAT if your business’s annual taxable turnover goes over this threshold (or you know that it will).

Some businesses will also need to register when selling particular goods or services, and in certain locations or markets, for example Northern Ireland and the EU. Read more about when to register.

How to work out taxable turnover

Your VAT taxable turnover is the total value of everything you sell that’s not exempt from VAT (exemptions include lottery ticket sales, postage stamps or services, and certain financial services – but VAT is applicable in some form to most goods and services).

Can a sole trader be VAT registered?

If you’re a sole trader and your annual turnover is over the £85,000 threshold, then you’ll need to register your self-employed business for VAT. The VAT threshold applies regardless of your business structure.

How to register for VAT

You can apply for VAT registration either online or by post. Whether you’re self-employed or a limited company, these are the steps to getting registered for VAT:

Information you’ll need to register for VAT

You’ll need to provide different information depending on your business structure.

How to register online

The easiest way is to register online, using your business tax account. Register for VAT online at the UK government’s VAT registration hub.

An agent (for example, an accountant or tax adviser) can also register your business and deal with HMRC for you.

You’ll then receive a VAT certificate from HMRC in the post, within 30 days of registration.

How to register by post

Some businesses can’t register online and will need to download a VAT1 form and send it by post. This can include businesses that are:

• applying for a registration exemption
• joining the Agricultural Flat Rate Scheme
• using separate VAT numbers to register different parts of the business

You might need to complete an additional form, depending on your business – visit the government’s how to register page for guidance on which one applies.

What is a VAT certificate?

You must have a VAT certificate in order to charge VAT on sales and show VAT on your invoices.

The certificate will show your:

• VAT number
• first VAT return (and payment) details
• effective date of VAT registration

You’ll get a VAT registration certificate from HMRC as part of the process of registering for VAT. It’s important to make sure you keep information on your VAT certificate up to date, including your address and turnover. Just as you would with your business insurance.

When will I get a VAT registration certificate?

It can take up to 30 days to process VAT registrations and to send your VAT certificate, according to the UK government website.

How to get a VAT number

You’ll get a VAT number as part of the VAT registration process. Once you’ve registered online or by post, you’ll be sent a certificate showing your VAT number. This is the number you’ll include on invoices and can put on your business website.

How to check if a company is VAT registered

When buying goods and supplies from other businesses, you might see a VAT number on the invoice. If you want to check if a VAT number is genuine, use the tool on the government website.

As well as on invoices, businesses often show their VAT number on their website.

Charging and paying VAT

You can’t charge or show VAT on invoices until you know your VAT number, but you may still need to pay VAT for this period.

The UK government website recommends increasing your prices to allow for this. Explain what’s happening to your customers, and plan to reissue the invoices showing VAT once you have your VAT number.

From your effective date of registration, you’ll need to:

• charge VAT correctly
• pay any VAT that’s due
• submit VAT returns
• keep VAT records and use a VAT account
• follow HMRC’s Making Tax Digital for VAT rules (in most cases)

Read our guide to Making Tax Digital for more help on this important topic.

There’s also our Self Assessment and tax hub resource hub, if you need more general information on tax.

Filing your VAT tax return

Now you’ve registered for VAT, you’ll need to file a VAT tax return.

You’ll usually need to submit a VAT return every three months to HMRC. Our guide to VAT returns has everything you need to know.

When to register for VAT

VAT registration becomes compulsory when:

• you expect your VAT taxable turnover to go over £85,000 in the next 30-day period
• your business had a VAT taxable turnover exceeding £85,000 over the last 12 months

Remember, these are calculated on a rolling basis, so it’s not enough to review your taxes once a year and register if your income has exceeded the threshold. You’ll need to keep a regular check on your rolling 30-day and 12-month periods and register on time.

If you’re going to exceed the VAT threshold in the next 30 days

If you think your total VAT taxable turnover will go over £85,000 in the next 30-day period, you’ll need to inform HMRC and register for VAT.

You must do this by the end of that 30-day period, because the effective date of registration is the date you realised (not the date you go over the threshold).

Example

Your business has a typical monthly turnover (all VAT taxable) of £4,000. With some last-minute scaling up, you’ve unexpectedly secured a single contract for £88,000. This will take you over the £85,000 VAT threshold during the next 30 days.

You realised that you’ll exceed the threshold on 1 October 2023, which means you’ll need to register for VAT by 30 October 2023, and your effective date of registration will be 1 October 2023.

If you exceeded the threshold in the past 12 months

If your total VAT taxable turnover for the last 12 months was over £85,000, you’ll need to register. You can check this at the end of every month, but you must register within 30 days of the end of the month you went over the threshold.

Your effective date of registration will be the first day of the second month after you go over the threshold.

Example

Although your typical 12-month turnover is £70,000, you’ve noticed a spike in demand for your product. Looking at the period 31 August 2022 to 30 August 2023, you can see your VAT taxable turnover will go over £90,000, taking you over the £85,000 VAT threshold for that 12 months.

This means you’ll need to register for VAT by 30 September 2023, and your effective date of registration will be 1 October 2023.

Can I register for VAT if my turnover is below the threshold?

You don’t have to exceed the VAT threshold in order to register for VAT – it’s possible to register voluntarily.

But why might you consider doing this? Registering for VAT lets you reclaim VAT on items you buy for your business. If you pay more VAT than you collect from customers, reclaiming VAT makes up the difference.

It also means you’re ready for growth because you won’t need to keep an eye on your turnover.

On the other hand, VAT registration means more paperwork, and sometimes you’ll pay more to HMRC (if you collect more VAT from customers than you pay out). It’s best to look at the specifics of your business when deciding whether to register for VAT.

Late registration – going over the VAT threshold without realising

If you register late, you’ll need to pay the VAT owed from the date you should have registered. You may also get a penalty.

It’s important to stay on top of your accounting so you know if you’re going to go over the threshold. If you do realise that you’ve already exceeded the VAT threshold then it’s important to notify HMRC as soon as possible. You’ll need to work out the date when your taxable turnover went over £85,000.

Registering for VAT if you’re…

Taking over a business

If you’re taking over a business, check its VAT registration status as early as you can. You may need to register for VAT, even if it’s already registered.

A business based outside of the UK

Thresholds don’t apply to businesses outside the UK. You’ll need to register as soon as you supply goods and services to the UK, or if you expect to in the next 30 days.

What if your business is temporarily over the VAT threshold?

If you know you’re only going to breach the threshold temporarily, you can apply for an exception.

You’ll need to show evidence why you believe your VAT taxable turnover won’t exceed the deregistration threshold of £83,000 in the next 12 months.

You can write to HMRC using this address:

BT VAT, HM Revenue and Customs, BX9 1WR, United Kingdom

If they agree with your application, HMRC will confirm this with you in writing. If not, they’ll register you for VAT.

Deregistering or cancelling your VAT registration

VAT deregistration threshold 2023

Sometimes it might be beneficial for your business to deregister for VAT if your turnover is under the threshold. All you have to do is show HMRC that your taxable turnover will be less than the £83,000 deregistration threshold.

Deregistration isn’t compulsory though, and businesses can continue being VAT registered even if their turnover is less than £85,000.

Cancelling VAT registration

In some situations, you must cancel your VAT registration by a certain date. For example, you've stopped trading or making VAT taxable supplies.

You can cancel VAT registration online.

Transferring VAT registration

You might want to transfer a VAT registration from one business to another, or if the status of your business changes (for example from partnership to sole trader).

Visit the government’s page on how to transfer a VAT registration to understand the process from start to finish.

Changing VAT address (or any other details)

Visit the government’s changes to your details page to edit your address, name, accountant information, bank details, or anything else connected with your VAT registration.

You should also use this page if taking on responsibilities for someone who has died or is ill.

Tax is a complex topic so be sure to speak to a professional if you’re not sure of anything.

Accounting and tax guides for VAT registered businesses

• What is the VAT flat rate scheme?
• Cash basis vs accrual accounting – what’s the difference?
• What is a disbursement?
• A guide to bookkeeping for small businesses
• When is corporation tax due?
• Is public liability insurance tax deductible?