How to Register for VAT: Step-by-Step Guide

So, your business is growing, and you want to know how to register for VAT? Well, you’re in the right place as in the blog we’ll break down the when, where, why, how and who of the process.

But first, what is VAT? VAT stands for value-added tax and is a ‘consumption tax’ that is placed on the price of most, but not all, products and services when the business selling the item hits a certain turnover threshold.

VAT will be 20%, 5% or 0% depending on the goods and services you sell. But when do you need to register?

When do you need to register for VAT?

Before we get onto how, let’s first look at the when you need to register. You and/or your business must register for VAT when:

• Your total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold)
• You expect your turnover to go over £90,000 in the next 30 days

You must register if you believe you will go over the threshold in the next 30 days.

If you or your business operates outside the UK but trades with it, then you must register for VAT regardless of turnover.

How do you register for VAT?

There are two ways to register for VAT depending on if you are a sole trader or a limited company. Let’s quickly run through them both:

If you’re a limited company this is the documentation you’ll need:

• your company registration number
• your business’s bank account details
• your Unique Taxpayer Reference (UTR)
• details of your annual turnover

You’ll also need to have information regarding:

• your Self Assessment
• your Corporation Tax
• Pay As You Earn (PAYE)

If you’re a sole trader or part of a partnership you need the following documentation instead:

• your National Insurance number
• an identity document, like a passport or driving licence
• your bank account details
• your Unique Taxpayer Reference (UTR), if you have one
• details of your annual turnover

You’ll also need to have information regarding:

• your Self Assessment return
• payslips
• P60

Lastly, regardless of whether you are a sole trader or a limited company, you’ll need a government gateway ID and password.

Register for VAT By post

If for whatever reason you can’t access a computer or the internet and can’t register online, you can do it by post.

To do this you’ll need a VAT1 form. To get your hands on a VAT1 form you can contact HMRC using the VAT number. You’ll have to give a reason as to why you need a VAT1 form. The government website has laid out some example reasons, which include:

• your age, health condition, disability or location
• you object to using computers on religious grounds
• you do not have access to the internet

If your request is accepted, you’ll receive the form in the post to return. HMRC has also listed numerous other forms that you may have to print out if you have special circumstances.

Get support with VAT registration

Now if you really can’t face the hassle of submitting VAT returns, we can take it off your hands while advising on efficient tax savings.

While you wait

Once you’ve registered for VAT, you’ll have to wait for HMRC to get back to you with your nine-digit VAT number which you’ll need to add to all future invoices you raise.

However, while you wait for your VAT number, HMRC recommends you make the accounting adjustments early so you’re ready to pay them what they are owed.

When registering for VAT most business will increase their prices by the % VAT they’re being charged. However, some businesses can decide to leave their prices the same and take the VAT hit on their profit.

We dive deeper into how VAT will impact your prices in our ‘How much is VAT in the UK’ blog.

Penalties for not registering

If you don’t apply to register for VAT when you hit the threshold you could be at risk of a penalty. This is known as a failure to notify penalty and will arrive 30 days after hitting the turnover.

The penalty charge is not fixed and is worked out by HMRC through an eight-stage system detailed on their website.

If HMRC believes you are deliberately trying to mislead them, they may request to monitor your accounts more closely with the potential for criminal prosecution.

VAT Deregistration

Now just a quick note on deregistering for VAT.

If at any point your business falls below the £88,000 deregistration threshold for VAT, you can contact HMRC to deregister. Deregistering removes the VAT charge from your products and services, making it essential to reset it before you register.

The reason the deregistration threshold is £88,000 but the registration threshold is £90,000 is to accommodate small fluctuations small businesses sitting on that line might face. Essentially, the £2,000 gap is to stop you from having to constantly register and deregister.

Businesses can fall below £88,000 for many reasons such as downsizing or poor business performance.

If unsure when to deregister and register for VAT, speak to your accountant.

Concluding thoughts

VAT registration is an essential part of running a business within the UK. No matter if you’re a sole trader or operate a limited company, it’s incredibly important for you to remain aware of your turnover levels so you know when you need to register.

The steps in the guide should give you a clear path to registering for VAT once you hit the crucial £90,000 turnover mark. It’s important to remember if your business falls below the £88,000 turnover mark you can deregister, meaning you no longer need to add VAT to your product or service.

If you need support managing your accounts, VAT registration and VAT returns we can support you. Get in touch with us today if you need advice.