How to register for VAT: a step-by-step guide for small businesses

Some businesses are legally required to register for VAT, while others choose to do so voluntarily. But whatever your reason for registering, here’s how to go about it.

Key takeaways

• You must register for VAT if your taxable turnover exceeds £90,000 in any 12-month period

• You can register for VAT online through the GOV.UK website

• Once registered, you must start charging VAT on the products and services you sell to customers and pay it on goods you buy for your business 

• Usually, you must submit a VAT return and pay your tax bill every quarter

When to register for VAT

VAT stands for value-added tax, which is a tax charged on some goods and services. Your business must register for VAT if its taxable turnover exceeds the VAT threshold of £90,000 in any 12-month period. A business’s taxable turnover is the total value of everything it sells that’s not VAT exempt. 

If you exceed this threshold, you must register for VAT within 30 days. Failure to do so could result in hefty penalties.

If you don’t go over the £90,000 VAT threshold, you don’t need to register. However, some businesses register voluntarily.

Note that if your business only sells VAT-exempt goods and services, you can’t register for VAT.

Read more: 

• Legal requirements for starting a business

• Business tax guide

What do I need to register for VAT?

Before you start the registration process, you should gather together the following information:

If you’re registering a limited company, you need:

• Your company registration number

• Your business bank account details

• Your Unique Taxpayer Reference (UTR)

• Details of your annual turnover

You also need information about your self-assessment, your corporation tax and Pay As You Earn (PAYE). 

If you’re registering as an individual or partnership, you need:

• Your National Insurance number

• An identity document, such as a passport or driving licence

• Your bank account details

• Your UTR, if you have one

• Details of your annual turnover

You also need information about your self-assessment return, payslips and a P60.

How to register for VAT

Once you’ve got the above information to hand, follow the steps below:

• Log into your Government Gateway account online. To register for VAT, you need a Government Gateway user ID and password. If you don’t have them, you can create them when you sign in for the first time. 

• Once logged in, head to the “Get another tax, duty or scheme” section on the page, and click the button.

• Select VAT and begin the registration process.

• Once registered, your Government Gateway account becomes your VAT online account, and you should receive a confirmation email, your registration number (you must include this on all invoices) and your VAT certificate. Your certificate tells you when you need to submit your first VAT return. 

Note that you don’t have to complete your VAT return in one go – you can save it and come back to it later if needed. 

In some situations, you need to register by post using a VAT1 form, rather than online. This includes if:

• You want to apply for a registration exception because you exceeded the VAT threshold temporarily

• You’re joining the Agricultural Flat Rate Scheme

• You’re a limited liability partnership registering as a representative member of a VAT group

• You’re applying to register an overseas business

• You’re a local authority, parish or district council.

What happens after you register for VAT?

Once you’ve registered for VAT, you need to immediately start charging the appropriate amount of VAT (usually at the standard rate of 20%) on products and services you sell to customers. This is your ‘output VAT’. 

You must also pay VAT on goods and services you buy for your business. This is your ‘input VAT’. 

Most VAT-registered businesses must submit a VAT return each quarter to inform HMRC of how much output VAT they’ve charged and how much input VAT they’ve paid. This makes it crucial to keep up-to-date records. You need to submit your VAT return using accounting software that’s compatible with Making Tax Digital.

When you file your VAT return, you must show the difference between your output VAT and your input VAT. If the difference is a positive number, you pay that amount to HMRC; If it’s negative, you can reclaim the amount from HMRC.

For example, if your output VAT is £2,000 and your input VAT is £1,500:

• £2,000 - £1,500 = £500 – you pay HMRC £500.

But if your output VAT is £1,000 and your input VAT is £2,000:

• £1,000 - £2,000 = -£1,000 – you claim back £1,000 from HMRC.

Benefits of registering for VAT

Registering for VAT can make your business appear more credible and trustworthy. Some businesses only work with other VAT-registered businesses because they can both reclaim the tax.

Registering can also be beneficial if you buy large quantities of goods from suppliers charging VAT, because you can claim some of the VAT back. Just remember that you must keep accurate digital records and complete your VAT return on time. You may wish to hire a tax advisor or accountant to help you. 

Find out more about the pros and cons of being VAT registered.

This content is for informational purposes and it's not intended as financial or professional advice. Please talk to a qualified professional for guidance relating to your business' needs.