At some point in your business, you’ll most likely have to become VAT registered. There are a lot of things to bear in mind when planning to register, from admin to factoring in pesky wait times. Here’s everything you need to think about when approaching registering for VAT.


Be aware of the registration threshold

As of May 2024, the current threshold for VAT registration is £90,000 (was £85,000 before April) in UK revenue within a rolling 12-month period (not just the tax year). 


If your business generates £91,000 in revenue between 1st May 2023 and 30th April 2024, you’d be over the threshold (even if you’d only generated £84,000 between 1st April 2023 and 31st March 2024).

As it’s a rolling 12-month period, you always need to keep an eye on it in case it gets close. Once you hit the threshold, HMRC grant a grace period of one month to register, but the time they take to process your registration could easily take more time than that.


Register as early as possible

In short, your VAT registration number can take a LONG time to come through. If all runs smoothly, HMRC take up to 40 working days to send it through if you’re a limited company. In the worst-case scenario, it can sometimes take up to 10 months for businesses with different structures like partnerships. 

Even if you aren’t close to hitting the £90,000 limit just yet, do think about registering. It’s better to have your number sooner rather than later, so you’re not left waiting around for it once you’ve already hit the threshold and need to start paying VAT.


Your VAT registration depends on your business

Most things and services sold in the UK have VAT on them, but certain products or services are exempt. Books and children’s clothes are both zero-rated for VAT, while the majority of financial services are VAT exempt. 

If your business deals in any of these, you won’t be required to register for VAT, but it can be beneficial to do so. Once registered, you can claim VAT for products and services your business has purchased, although if your sales are VAT exempt reclaiming VAT is also limited.

For example, your children’s clothes business has zero VAT on its products, but you could still benefit from claiming the VAT on materials you’ve purchased to manufacture the garments. It’s a good idea to talk to your accountant here to see if your business would benefit from registering.


You can claim accumulated VAT on your first return

In your first VAT return, you can claim VAT on services from six months before the registration date and on tangible items you still own from four years before the registration date.

For example, if you’re VAT-registered from 1st May 2024, you can reclaim VAT on accounting services you purchased from 1st November 2023. You could even reclaim VAT on a laptop bought for your business in May 2021 if you have a VAT receipt.

This is why it’s so important to retain all VAT receipts. When you buy something for business purposes, make sure you ask for a copy of the VAT receipt (not just the credit card receipt!). Then, use Dext Prepare to capture it so all of the details are stored, ready for when you submit your first VAT return.


Get a reliable accountant to handle your first VAT return

For many business owners, the first VAT return ends up being a refund. This is because they have so much VAT accumulated over the four years for products and six months for services. 

It can be quite a big task sorting out the first VAT return, which is why we take care of it for our clients. HMRC often have questions when your first VAT return results in a refund, usually requesting further proof and documentation. 

We handle all queries and conversations with HMRC for our clients, so you don’t even have to think about it. Want to know what that would look like for you? Tell us about your business to get started.