When is the right time to register for VAT?

It’s important that you know when to register for VAT so you don’t get hit with backdated charges and fines. One way of keeping track of this is to keep your bookkeeping up to date. Once your VATable turnover exceeds £85,000 it will be time to register for VAT.

HMRC expects you to let them know when you anticipate to hit the threshold rather than telling them you have. This is why it’s important to keep a close eye on your income. Having a bookkeeper keeping an eye on your turnover is a great way to avoid those fines!

When to register

The moment you realise that you are close to hitting the VAT threshold of £85,000 you must register for VAT. Your VAT registration date will be the date you noticed this, not the date it actually happens.

If you hit the VAT threshold without realising, then you must report this to HMRC within 30 days of the date you hit the threshold. If you don’t this may result in backdated charges and fixed penalty fines.

In these circumstances your VAT registration date won’t be the date you realised. Your registration date will be the first day of the month following the date you hit the threshold. For instance between 10th April 2021 and 9th April 2022 your taxable turnover was £86,000 you would need to register by 30th May 2022 and your registration date would be 1st June 2022.

Registering for VAT voluntarily

You may ask yourself, “why would I become VAT registered if I don’t have to?” Well the answer is, it could actually be more beneficial to you to become VAT registered. For instance, if your business pays lots of VAT then it may be in your best interests to register so that you can reclaim the VAT. You can even backdate the VAT you have paid on goods for the last 4 years as long as you are still using them in your business and you have proof that you purchased them. You can also backdate the VAT you have paid out on services but only as far back as 6 months.

Some businesses choose to register for VAT as it makes them more reputable by displaying their VAT registration number on their invoices and website. It gives the impression that the business is making a good profit and is well established, when this may not even be the case!

If you are close to hitting the threshold then it may be advisable to register for VAT so that you don’t get hit with any fines.

We do need to point out that if you choose to register for VAT you will need to comply with the rules of Making Tax Digital. If you’re one of our clients you’re more than likely complying with your software anyway, so we’ve already got you prepared!

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