Understanding the VAT Threshold and When to Register
30th May 2024
Becoming VAT registered is often a milestone in the life cycle of a business and with it comes a wide range of compliance requirements and deadlines. It’s important to be one step ahead and have a plan in place for when this happens, so that your business can continue with little disruption.
A key part to being prepared is understanding when your business is required to register for VAT and the dates that this is effective from. Let’s dive into the criteria:
Threshold Amount
The current VAT registration threshold for the UK has, from the 1st April 2024, been increased to £90,000 from £85,000 as confirmed by the Chancellor in his 2024 Spring Budget. This comes as a welcome change for small businesses who have a general private customer base and would be negatively affected by becoming VAT registered.
When to Register
If your total VAT taxable turnover for the last 12 months exceeds £90,000 (the VAT threshold), you must register for VAT within 30 days of reaching this level. It’s important to note that this is looked at on a rolling basis, meaning that it’s crucial to have up-to-date, reliable data making you able at any given point, to assess whether you have exceeded the threshold.
Alternatively, if you expect that your turnover will go over £90,000 in the next 30 days, you should also register promptly.
Even if your turnover is below the threshold, you can register for VAT voluntarily, which can prove advantageous if your taxable outgoings exceed your taxable incomings.
Effective Date of Registration
If you exceeded the threshold in the last 12 months, your effective date of registration is the first day of the second month after you went over the threshold.
For example, if your VAT taxable turnover exceeded £90,000 between 10 July 2023 and 9 July 2024, you must register by 30 August 2024, and your effective date of registration would be 1 September 2024.
If you anticipate exceeding the threshold in the next 30 days, you must register by the end of that 30-day period, and your effective date of registration will be the date you became aware of this, not the date your turnover went over the threshold.
Exemptions
If everything you sell is exempt from VAT, you do not have to register for VAT.
However, if you sell goods or services that are VAT exempt and are based in Northern Ireland, you’ll need to register if you buy goods for more than £90,000 from EU VAT-registered suppliers to use in your business.
By staying on top of this, you can ensure that your business’ transition to becoming VAT registered is without the hiccups that many others experience. Please note that this summary is for information purposes only, and specialist advice should always be sought prior to taking any action on matters discussed in this article.
