The short version: VAT (Value Added Tax) is a tax added to most goods and services. The standard rate is 20%. Businesses above the registration threshold must charge it and pay it to HMRC.
When do you need to register?
If your taxable turnover exceeds the VAT threshold (check gov.uk for the current figure), you must register. Below that, it’s optional.
Why register voluntarily?
You can reclaim VAT on business purchases. This matters if you buy a lot of VAT-able supplies. It can also make you look more established to other businesses.
How does it work?
You charge VAT on your sales, pay VAT on your purchases, and pay the difference to HMRC (or claim back if you paid more than you charged). Returns are usually quarterly.
What about flat rate schemes?
Small businesses can use simplified VAT schemes that reduce admin. You pay a fixed percentage of turnover rather than tracking every transaction.
Not sure if you should register for VAT? Let’s work out what makes sense for your business.
