When and how to register for VAT (UK)

Introduction

To register for VAT in the UK, you must apply if your taxable turnover exceeds £90,000 in any rolling 12-month period or if you expect to pass that threshold in the next 30 days. Registration is required for UK-based and overseas sellers supplying goods or services in the UK.

This guide outlines mandatory and voluntary registration rules, explains how to calculate your VAT effective date, and provides step-by-step instructions on how to register as a sole trader or limited company. We also cover the consequences of late registration, key digital requirements (MTD), and the pros and cons of registering early.

When do I need to register for VAT in the UK?

Businesses in the UK and the Isle of Man must register for Value Added Tax (VAT) and charge it on most goods or services if:

• Your total taxable turnover in any rolling 12-month period goes over the VAT threshold (£90,000 in 2025/26)
• You expect to break this threshold in the next 30 days

The standard VAT rate is 20% for most goods and services. Some items, such as most food, books and children’s clothing, are zero-rated. This means they still count towards your taxable turnover, but the rate you charge on them is 0%. Others, such as children’s car seats and residential conversions, are eligible for a reduced rate of 5%.

Special rules and exceptions

You must also register, regardless of turnover, if you and your business are based outside the UK and you supply goods or services to the UK, or expect to do so within the next 30 days. This includes digital services.

You can apply for a registration ‘exception’ if your turnover goes over the threshold temporarily and you anticipate it will fall again.

Northern Ireland operates a dual VAT system with the UK and the EU. Check these government guidelines if you’re selling or moving goods between there and the EU.

There are also specific rules for when you take over a business, depending on whether the seller was registered and the entity is transferred as a going concern.

If your company ceases trading, you must deregister for VAT within 30 days of becoming dormant. However, if you plan to restart trading, you must send “nil” or empty VAT returns while your company is dormant.

What is my VAT “effective date”?

It’s the date from which you must start charging VAT on sales and reclaiming VAT on business purchases. You must register within 30 days from the end of the month in which your turnover exceeds the threshold. Your effective date of registration is the first day of the month after that.

For example, if your 12-month turnover exceeds £90,000 on any day in July, you must register by 30 August, and your effective date will be 1 September.

If you expect to break the threshold within the next 30 days, you must register within that timeframe. However, your effective date is the day you realise this, not when the turnover actually exceeds the level. For example, on 1 May, you arrange a £100,000 service contract, for which you’ll be paid at the end of May. You must apply for registration by 30 May, but your effective date will be 1 May.

If you volunteer to register, you can choose your effective date, but once you select it, you can’t change it.

Ian Wright, managing director of Payroll Prices, says: “What catches many people off guard is the fact that this applies to any rolling 12-month period.

“New businesses struggle if they do not track turnover during their first year of operation. Growth spurts, seasonal peaks and one-off large orders can push you over the edge, and mistakes usually emanate from hurriedly compiled records rather than deliberate actions. If you monitor your turnover every month, you will be one step ahead.”

What does VAT registration mean for my business?

Once registered, you effectively become a tax collector, charging VAT on your qualifying goods and services (known as taxable supplies) and paying it over to HMRC. There is an administrative and technical impact. For example, registered businesses at or above the VAT threshold must conduct VAT accounting, which includes:

• Submitting a VAT Return through Making Tax Digital (unless exempt), which means you or your accountant will need MTD compatible software. Returns are usually quarterly, unless you are on a monthly or annual scheme, even if you have no tax to pay or reclaim.
• Paying over VAT due by the deadline for each period.

There can be financial benefits for you as well, depending on your business type and model. You can check the impact of registering on your business with this government tool and read more about the pros and cons later in this guide.

What happens if I apply for VAT late?

You must pay VAT on any sales you’ve made since the date you should have registered. You might need to pay a penalty, which will depend on how much you owe and how late your registration is.

Impacts for non-compliant overseas sellers

If you’re an overseas seller and don’t meet your UK VAT requirements, HMRC may:

• Charge you a penalty
• Direct you to appoint a VAT representative in the UK
• Ask you for a suitable security deposit
• Notify your online marketplace, such as Amazon, which may remove you from its site

E-commerce platforms can bar you

Online marketplaces can also directly remove you if:

• They know you must register for VAT but you haven’t
• You’ve not given them a valid VAT registration number for your business

The government guide for businesses selling goods in the UK using online marketplaces gives more information about VAT obligations. Its explainer on online VAT seller checks shows how operators must monitor you, and what HMRC will do if they don’t.

Sztejka says: “HMRC have marketplace sales data, so late registration isn’t something you can avoid or hide from. You’ll need to backdate your registration to the correct date and pay the VAT due for that period. If you didn’t add VAT to your prices at the time, you’ll still have to pay it, which can eliminate profit for those months and even create a loss.”

What are the pros and cons of voluntary VAT registration?

Given the administrative burden of VAT registration, why would you register even if your business turnover does not exceed the threshold?

Potential benefits

Being VAT registered can positively impact your brand by making you appear larger and more professional to clients, suppliers, and even lenders and investors.

Financially, it can be attractive if you primarily deal with VAT-registered businesses. This means they can reclaim VAT. So, charging it broadly has a neutral effect, but you can recover input VAT on many business purchases, such as stock, machinery, and professional fees.

This can improve your margins or cash flow, especially if your expenses are significant relative to turnover. It often works well in:

• Capital‑intensive or product‑based businesses, such as manufacturers, wholesalers, and e-commerce sellers
• High-cost startups
• Fast-growth companies

Voluntary registration also tends to work well in B2B services and for contractors – such as IT, consulting, professional services, creative agencies, and freelancers – if their clients can recover VAT.

Wright says: “Whether you’re a brand-new sole trader or an established limited company, if the majority of your clients are VAT registered and you wish to reclaim VAT on your business purchases, voluntary registration might be beneficial. For many young companies, the voluntary step improves early cash flow more than any other measure.”

Possible disadvantages

The downsides of registration include the time and effort required to complete regular VAT returns and keep the necessary records. Adding 20% VAT to your invoices risks making you less competitive if your customers are not registered and cannot claim it back. This means it can be disadvantageous in consumer-facing sectors, such as small retail, hospitality, and personal services like hair and beauty.

Very low-cost, lifestyle, or side-hustle operations with modest expenses and mainly non-VAT registered clients – such as tutors and therapists – tend to see little benefit.

Common mistakes include sending returns late, for which the penalty can be costly, and not saving the tax you’ve charged carefully so you can pay it over in each accounting period.

If you’re a growing consumer business, you should plan for registration in advance. “VAT normally erodes profit margins for B2C sellers,” says Sztejka. “You may need to increase prices before you have enough scale to absorb it. Early registration forces business owners to calculate their pricing properly and tighten up their financial processes.”

How do I register my company for VAT?

You can register for VAT online, and it’s relatively easy if you have all the right information. The information you need depends on the type of business you have. The key steps involved are:

1. Confirm you need or want to register. It’s compulsory if your taxable turnover exceeds £90,000 in a rolling 12‑month period, or you expect it to in the next 30 days. Otherwise, you can register voluntarily.
2. Decide who is registering – for example, are you a sole trader or limited company?
3. Gather the correct information for your business type, as listed above.
4. Check if any might apply, for example, if you mainly sell zero‑rated goods.
5. Complete the registration online. Sign in to your Government Gateway (or create an account), then click 'Register for VAT' and follow the prompts. Alternatively, request a paper VAT1 form from HMRC.
6. Wait for HMRC to process your application. Log in to your VAT account to view your registration certificate.
7. From your effective date, start charging VAT on taxable supplies, keep VAT records using Making Tax Digital‑compatible software, and submit VAT Returns by the deadlines for each period.

Registering for VAT as a limited company

For a limited company, registration is in your entity’s legal name. The VAT liability rests with the company, not the directors personally. You’ll need your:

• Company registration number (CRN)
• Business bank account details
• Unique Taxpayer Reference (UTR)
• Current and estimated taxable turnover for the next 12 months

You will also need information about your:

• Self Assessment return
• Corporation Tax
• PAYE

Registering for VAT as a sole trader

A sole trader is a business owned and operated by an individual. The VAT registration is in your name, and you are personally responsible for the VAT accounting. To register, you’ll need your:

• National Insurance number
• An identity document, like a passport or driving licence
• Bank account details
• Unique Taxpayer Reference (UTR) if you have one
• Current and estimated taxable turnover for the next 12 months

You will also need information about your:

• Self Assessment return
• Payslips
• P60

How long does VAT registration take?

After receiving your application, HMRC will either ask you for more information or give you your VAT registration number.

The timeframe depends on your application, but it currently takes about three to six weeks. If you’ve not heard anything after 40 working days, contact HMRC.

Typically, registered businesses reflect the extra 20% they charge on their supplies in their pricing to protect profit margins. However, you shouldn’t issue “VAT included” invoices until you have obtained your registration number. Wait until it arrives, then reissue any sent since your effective date with the new price.

How much does it cost to register for VAT?

There is no charge to HMRC for registering. You may have to pay for professional advice about whether to register and how to account for VAT. You may also need to pay subscriptions for MTD-compatible accounting software.

If you don’t have time for registration, you can purchase the service from a company formation agent or ask your accountant. At 1st Formations, we charge just £69.99 +VAT for a service that includes:

• Preparing your application and sending it
• Forwarding your number by post
• Advice on how to open your HMRC government gateway
• Expert help with any VAT questions

How to apply for a VAT registration exemption and what qualifies

Exempt supplies are those for which no VAT is charged, and which fall outside the scope of taxable supplies. They include insurance, education services, and gambling products. If everything you sell is exempt, you cannot register as you are outside the VAT system. You don’t need to apply for a registration exemption.

If most of your supplies are zero-rated, rather than exempt, you may not need to register. Complete a VAT1C form and enclose a letter explaining why your supplies are zero-rated.

In rare cases, you can ask for an exemption from registration where the VAT you’d pay on business purchases would regularly be higher than the VAT you’d charge on sales. Apply for an exemption from registration:

• Using the register for VAT online service
• By post – contact HMRC to request the VAT1 form.

Submitting your first VAT return: Tips and common mistakes

There are several things you can do on your first return that many people are unaware of, says Ben Sztejka, Managing Director at Your Ecommerce Accountant. You can:

• Reclaim six months of services from before the registration date
• Reclaim any unsold stock bought before registration, if you have the VAT invoices
• Postpone VAT when you import items, which can help cash flow

“A common mistake on the first return is to calculate VAT on the amount you receive in your bank rather than gross sales, which is the correct way to do it,” adds Sztejka. “This could lead to a huge under-reporting of VAT if not done correctly.”

Need help getting VAT registered?

If you're getting your business off the ground and need help staying on top of key setup tasks, such as VAT registration, 1st Formations offers professional support at every stage. Our VAT Registration Service can be purchased separately or as part of a company formation package.