VAT registration and VAT returns

VAT touches almost every growing business at some point. Either your turnover heads towards the VAT registration threshold and you need to decide what to do, or you are already registered and a VAT return is due every quarter. We handle both: company VAT registration or sole trader registration when it applies, and a VAT return service each quarter, built from books we keep reconciled through the year.

Who it's forSole traders, freelancers and limited companies who are close to the VAT registration threshold, newly registered, or tired of preparing VAT returns themselves.

VAT registration: when you need to register

You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, the VAT registration threshold. You must also register if you expect your taxable turnover to go over £90,000 in the next 30 days alone. Turnover here means everything you sell that is not exempt from VAT, so it is worth checking the rolling 12-month figure every month rather than waiting for the year end.

Once you go over the threshold, you need to tell HMRC within 30 days of the end of the month you went over.

You can also choose voluntary VAT registration below the threshold. That can make sense if most of your customers are VAT-registered businesses and you buy a lot with VAT on it, because you can then reclaim that VAT. It rarely suits a business selling mainly to the public, where adding VAT means raising prices or absorbing the cost.

When your registration goes through, HMRC issues a VAT registration number. It appears on your invoices from then on, and you charge VAT on your sales from your registration date. If your turnover later drops below £88,000, the deregistration threshold, you can ask to cancel.

What a VAT return is, and how often it is due

A VAT return tells HMRC how much VAT you charged on your sales and how much you paid on your business costs, in a set of boxes on the VAT return that must agree with your books. The difference is what you pay, or what HMRC pays back to you. Most businesses send one every 3 months, even when there is nothing to pay or reclaim.

Your VAT return dates follow your VAT periods. The deadline for VAT return submission online is usually one calendar month and 7 days after the end of the period, and the VAT return payment is due by the same date. A quarter ending on 31 March, for example, has a VAT return deadline of 7 May. Our tax return deadlines guide sets out how this fits with your other dates.

VAT late submission penalty points and late payment

For VAT periods starting on or after 1 January 2023, late VAT returns are dealt with by penalty points:

• One point for each VAT return submitted late, including returns with nothing to pay
• A threshold of 4 points if you file quarterly, 5 if monthly and 2 if annually
• A £200 penalty when you reach the threshold, and another £200 for each further late return while you are at it

Paying late is treated separately: late payment penalties and interest apply. HMRC explains both on its VAT penalties guidance. The simplest protection is a return prepared well before the deadline.

The VAT schemes: Flat Rate and Cash Accounting

Two HMRC schemes change how VAT is worked out:

The schemes cannot be used together. Which one, if either, suits you depends on what you sell and what you buy, and we work that out with you before you register.

How we handle your VAT returns

1. 1

   Registration

   We check your turnover against the VAT registration threshold and register you when it applies, or voluntarily if it makes sense.

2. 2

   Through the quarter

   Your books are kept reconciled, with the VAT treatment checked on each sale and purchase.

3. 3

   Prepare and check

   We prepare the VAT return from the reconciled figures and go through it with you before anything is sent.

4. 4

   Submit and pay

   We submit the VAT return before the deadline and tell you what to pay and when.

What we need from you is usually short: access to your bank feed, copies of sales invoices and purchase receipts, and a quick answer to any queries we collect. If we already do your bookkeeping, most of that is in place.

VAT for sole traders and the self-employed

VAT registration works the same way for sole traders as for limited companies: the £90,000 threshold applies to your business turnover, not your profit. Freelancers and contractors often cross it without noticing, because a few large invoices can tip the rolling 12-month total. Our page for freelancers and the self-employed covers the other taxes you will face, and if you are deciding how to trade, see sole trader or limited company.

Questions people ask