How to register for VAT

Figures are correct at the date of review. Always check GOV.UK for the latest.

It is a rolling 12 months, not your financial year

This is the single most common misunderstanding.

The £90,000 threshold is measured across any rolling 12 month period. Not your accounting year. Not the tax year. Any twelve consecutive months.

So you check it every month, looking back at the previous twelve. A good December can push you over on a test that has nothing to do with your year end.

The backward-look test

If your taxable turnover for the last 12 months goes over £90,000:

• You must register within 30 days of the end of the month you went over
• Your registration takes effect on the first day of the second month after you went over

Example, from HMRC's own guidance: On 15 July, your taxable turnover for the last 12 months hits £100,000 for the first time. You must register by 30 August. You are VAT registered from 1 September.

The forward-look test, and this is the dangerous one

If you realise your taxable turnover will go over £90,000 in the next 30 days, you must register by the end of that 30 day period.

And your registration date is the day you realised. Not the day the money arrives.

HMRC's example: On 1 May you sign a £100,000 contract, to be paid at the end of May. You must register by 30 May, and you are VAT registered from 1 May.

Read that again. You are VAT registered from the day you signed, before you have invoiced anything. Which means VAT is due on that contract, and if you did not add it to the price, it comes out of your margin.

Sign a big contract, check this immediately. Not at your year end.

What "taxable turnover" actually includes

Everything you sell that is not VAT exempt or out of scope. Including:

• Zero-rated goods (yes, zero-rated still counts towards the threshold)
• Reduced-rated and standard-rated goods
• Goods you hired or loaned to customers
• Business goods used for personal reasons
• Goods bartered, part-exchanged or given as gifts
• Services from overseas businesses that you had to reverse charge
• Goods and services under the domestic reverse charge
• Building work over £100,000 your business did for itself

Zero-rated sales count. People miss this constantly, and it is how a business selling mostly zero-rated goods discovers it should have registered eighteen months ago.

What late registration costs

You must pay HMRC the VAT on every sale you made from the date you should have registered.

Not from when you noticed. From when you should have registered.

And you almost certainly did not charge it to your customers. So it comes out of your own pocket. On £150,000 of sales at 20%, that is £25,000 of VAT you never collected, and now owe.

There may also be a penalty, depending on how much you owe and how late you are.

This is the most expensive avoidable mistake a growing small business makes. It is entirely preventable by checking a rolling twelve month figure once a month.

Registering voluntarily

You can register below £90,000 if you want to. It can be worth it if you sell mainly to VAT-registered businesses (they reclaim the VAT, so your price does not really rise) and you have VAT to reclaim on your own costs.

It is a bad idea if you sell to consumers, because you have just made yourself 20% more expensive. We cover this in full in voluntary VAT registration.

If you go over the threshold temporarily

You can apply for a registration exception if the breach was a one-off. HMRC will consider it and write to confirm. If they refuse, they will register you.

Once you are registered

Registration is only the start. Next comes charging VAT correctly, filing quarterly returns under Making Tax Digital, and paying your VAT bill on time, which has its own deadline and a weekend rule that trips people up.