VAT Threshold Changes: Do You Need to Register (or Deregister)?

In a nutshell: The amount you need to earn before registering for VAT has gone up to £90,000 (from £85,000). This means some businesses can avoid VAT altogether! Here's what you need to know:

When to Register for VAT:

• You MUST register if your sales in the past year were over £90,000 OR you expect them to go over £90,000 in the next month.

• This applies even if you're not based in the UK but sell to UK customers.

What about "Taxable Turnover"?

This just means the sales you make that would normally have VAT added if you were registered. It doesn't include things that are VAT-exempt.

How Long Do I Have to Register?

If your sales went over £90,000 in the past year, you have 30 days from the end of that month to register.

Example: Your sales for the year ending May 18th, 2024 were £92,430. You need to register by June 30th, and your VAT starts on July 1st.

What if My Sales Are Going to Spike Soon?

If you expect your sales in the next month to be over £90,000, register by the end of that month. Your VAT starts the day you realize you'll hit the limit.

Example: On July 2nd, you sign a big contract for £120,000. You need to register by July 31st, and your VAT starts on July 2nd.

Can I Register for VAT Even if I Don't Have To?

Yes, you can! This might be helpful if you buy a lot of things with VAT but sell things without VAT. However, it also means you'll need to charge VAT to your customers, which can make them less likely to buy from you. Talk to an accountant to see if this is a good idea for your business.

Deregistering for VAT:

The amount you can earn before needing to deregister is now £88,000 (up from £83,000). This means some businesses can now opt out of VAT altogether! This can make you more competitive and save you time on paperwork. However, you won't be able to get back any VAT you pay on things you buy for your business.

Should I Deregister?

Think carefully! If your sales might go over £90,000 soon, deregistering now might just mean you have to register again later. Talk to an accountant to see if deregistering is the right move for you.