Understanding when to register for VAT (Value Added Tax) can significantly impact your business finances. With the latest thresholds and regulations in place for 2025, businesses must be vigilant about their obligations. In this blog post, we’ll explore when you should register for VAT, the latest thresholds, and key considerations for your business.
Current VAT Registration Threshold for 2025-26
As of April 2024, the VAT registration threshold in the UK increased to £90,000. This means if your taxable turnover exceeds £90,000 in a 12-month period, you’re legally required to register for VAT.
When Should You Register?
You must register if:
- Your business’s VAT taxable turnover exceeds £90,000 in the past 12 months.
- You expect your turnover to exceed the threshold within the next 30 days.
You can also voluntarily register for VAT even if your turnover is below the threshold, which might be beneficial depending on your business model.
Benefits of Voluntary VAT Registration
Businesses might consider voluntary VAT registration for several reasons:
- Enhanced credibility: VAT registration can make your business appear more established and professional.
- Claiming VAT back: You can reclaim VAT on business-related purchases, potentially reducing costs.
- Competitive advantage: If you deal primarily with other VAT-registered businesses, registering can simplify invoicing and accounting.
Key Considerations Before Registering
1. Pricing and Profit Margins
Registering for VAT means you must charge VAT on your goods or services. This could affect your pricing strategy, especially if your customers are primarily consumers who can’t reclaim VAT.
2. Administrative Responsibilities
VAT registration requires diligent bookkeeping, regular VAT return submissions, and accurate record-keeping. Ensure you have the systems in place to handle these responsibilities effectively.
3. Choosing the Right VAT Scheme
Several VAT schemes are available, each with advantages and considerations:
- Standard VAT Scheme: Pay and reclaim VAT quarterly.
- Flat Rate Scheme: Pay a fixed percentage of your turnover, simplifying record-keeping.
- Cash Accounting Scheme: VAT is recorded when payments are made, not when invoices are issued, aiding cash flow.
Choose the scheme best aligned with your business size, sector, and financial management capabilities.
Consequences of Late Registration
Failing to register on time can lead to penalties and interest charges on the VAT owed. Prompt registration avoids potential fines and unnecessary complications with HMRC.
Keeping Track of Your Turnover
Regularly reviewing your rolling 12-month turnover helps ensure compliance. Using accounting software can simplify this process, providing real-time visibility into your financial position.
Expert Advice and Next Steps
Considering registering for VAT or unsure if now is the right time? Crossley & Davis provides tailored advice to businesses navigating VAT complexities, ensuring compliance and optimal financial management.
Contact our team today for personalised support and peace of mind in managing your VAT responsibilities.
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