How to register for VAT in the UK (and when you can deregister)

When you need to register for VAT

VAT registration is mandatory if your business meets certain criteria, but you can also choose to register voluntarily.

Compulsory registration

You must register for VAT if:

• Your VAT taxable turnover in any rolling 12-month period goes over the current registration threshold of £90,000. You need to register within 30 days of the end of the month when you exceeded this threshold.
• You expect your VAT taxable turnover to go over £90,000 in the next 30 days alone. In this case, you must register by the end of that 30-day period.

It's important to note that "taxable turnover" refers to the value of all goods and services you sell that are not exempt from VAT. This is a rolling 12-month period, not tied to your accounting year, so you need to monitor it regularly.

Voluntary registration

Even if your turnover is below the threshold, you can choose to register for VAT voluntarily. This can be beneficial for some businesses, particularly if:

• Your customers are mostly VAT-registered businesses themselves, as they can reclaim the VAT you charge them.
• You incur significant VAT-bearing expenses (e.g., on equipment, materials, or subcontractors) and want to reclaim the input VAT.

However, voluntary registration also means more administration and you will need to charge VAT on your sales, which could make your prices less competitive for non-VAT registered customers.

How to register for VAT

The most common and efficient way to register for VAT is online through your Government Gateway account.

1. Gather your information: Before you start, have the following details ready:

• Your company registration number (if a limited company).
• Your Unique Taxpayer Reference (UTR).
• Your business bank account details.
• Details of your annual turnover and an estimate for the next year.
• Your National Insurance number and date of birth (if a sole trader or partnership).
• Your business activities and type.

1. Log in to Government Gateway: Access your Government Gateway account. If you don't have one, you'll need to create one.
2. Start the VAT registration process: Navigate to the "Get another tax, duty or scheme" section and select VAT. Follow the online prompts to complete the registration form. You can save your application and return to it later if needed.
3. Submit your application: Once complete, submit the form. There is no direct cost to register for VAT with HMRC.

After you register

HMRC will process your application, which can take up to 30 working days, but may sometimes take longer.

• VAT registration certificate: You will receive a VAT registration certificate, which includes your 9-digit VAT number and your effective date of registration.
• Effective date of registration: This is the date from which VAT rules apply to your business. If you registered because you exceeded the threshold, it's usually the first day of the second month after you went over it. If you registered because you expect to exceed the threshold, it's the date you realised this. You must start charging VAT and keeping VAT records from this date, even if you haven't received your certificate yet.

When you can deregister for VAT

You can deregister for VAT if your business no longer meets the requirements for compulsory registration, or if you cease trading.

Deregistration thresholds

You can apply to deregister for VAT if:

• Your taxable turnover falls below the deregistration threshold, which is currently £88,000 over the next 12 months.
• You stop making taxable supplies or close your business.
• Your business structure changes (e.g., from sole trader to limited company).

It's important to monitor your turnover to ensure you remain eligible for deregistration.

How to deregister for VAT

1. Check eligibility: Confirm that your business meets the criteria for deregistration.
2. Notify HMRC: You can notify HMRC online through your Government Gateway account. Alternatively, you can use form VAT7 if applying by post. You'll need to provide details about your business, the reason for deregistration, and your preferred effective date of deregistration.
3. Submit a final VAT return: After your deregistration is approved, you will need to submit a final VAT return. This will cover the period up to your effective date of deregistration. You may also need to account for VAT on any stock or assets your business still holds at the point of deregistration, if you claimed VAT on them when you bought them.
4. Keep records: Even after deregistering, you must keep your VAT records for at least six years.

Common mistakes

• Late registration: Failing to register for VAT within 30 days of exceeding the threshold can lead to penalties and backdated VAT bills.
• Incorrectly calculating turnover: Only taxable turnover counts towards the threshold. Exempt sales, grants, or loan receipts are not included.
• Not monitoring rolling 12-month turnover: The threshold is based on a rolling 12-month period, not your accounting year. Many businesses miss this distinction.
• Not deregistering when eligible: Remaining VAT registered unnecessarily can increase administrative burden and may not be financially beneficial if your turnover has significantly dropped.
• Ignoring the effective date: You must charge and account for VAT from your effective date of registration, even if you haven't received your VAT number or certificate yet.