Would you rather someone else handled this? Our VAT returns service means we prepare and file every quarter, Making Tax Digital ready.
What to do at this stage
- Register on time. Within 30 days of crossing the threshold, or immediately if you expect to cross it within 30 days.
- Choose your scheme. Standard, Flat Rate or cash accounting, depending on your costs and customers.
- Go digital. Set up compatible software to keep records and file, as required by Making Tax Digital.
- Update your pricing and invoices. Start charging VAT from your effective date and issue proper VAT invoices.
- Reclaim pre registration VAT. On stock and assets from the 4 years before, and services from the 6 months before, if still used.
Hitting the VAT threshold?
The scheme choice and timing make a real difference. TaxTune registers you at the right moment on the best scheme, sets up your software, and handles your first return.
The two tests that force you to register
There are only two, and most people only know about the first one.
The backward look. If your taxable turnover for the last 12 months goes over £90,000, you must register. This is a rolling 12 months, checked every month. It is not your financial year, and that catches people out. A business that turns over £8,000 a month has passed £90,000 well before its year end.
The forward look. If you expect your taxable turnover to go over £90,000 in the next 30 days alone, you must register. This is the one that bites when a single large contract lands.
The dates, which matter more than the threshold
The two tests have different deadlines and different start dates, and getting them the wrong way round is expensive.
Under the backward look you must register within 30 days of the end of the month in which you crossed the line, and you are VAT registered from the first day of the second month after you went over. So if you pass £90,000 on 15 July, you register by 30 August and you are registered from 1 September.
Under the forward look you must register by the end of that 30 day period, and you are registered from the date you realised, not the date the money arrived. If you sign a £100,000 contract on 1 May that will be paid by the end of May, you apply by 30 May and you are registered from 1 May.
That difference matters because you owe VAT on sales made from your effective date of registration whether or not you charged it. If you register late, the VAT still has to come out of money you have already banked.
What changes the day you register
You start charging VAT on your standard rated sales, usually at 20%. You can start reclaiming VAT on your costs, and there are limited rules that let you go back on goods still held and services received before registration.
You also come straight into Making Tax Digital for VAT. Every VAT registered business is in it, whatever the turnover, and HMRC now signs new registrations up automatically. In practice that means three things: you keep your VAT records digitally, you file from software rather than typing figures into the HMRC website, and where data moves between programs it has to move by digital link. Copy and paste is not a digital link. A formula between spreadsheet cells is.
Schemes worth a look before you settle in
Flat Rate Scheme. You can join if you expect taxable turnover of £150,000 or less excluding VAT. You charge normal VAT but pay HMRC a flat percentage of your gross takings and generally do not reclaim input VAT. You have to leave once income including VAT goes over £230,000. Be careful of the limited cost business test: if you spend less than 2% of your flat rate turnover on goods, or more than 2% but under £1,000 a year, your rate is 16.5% regardless of trade, which usually makes the scheme worse than standard VAT.
Cash Accounting. You account for VAT when you are paid rather than when you invoice. Join at £1.35 million or less, leave at £1.6 million. If you invoice on terms and get paid slowly, this is often the single most useful thing you can do for cash flow.
Annual Accounting. One return a year with instalments through the year. Same £1.35 million joining figure.
The penalties, so you know what late costs
Late returns work on points. One point per late return, and for quarterly filers a £200 penalty at 4 points, then £200 for each further late return. Points expire after 24 months, or clear once you have filed four consecutive returns on time and everything due in the last 24 months is in.
Late payment is charged in stages: nothing if you pay within 15 days, 3% of what is outstanding at day 15, a further 3% at day 30, then a second penalty accruing daily at 10% a year from day 31 until it is paid. The old familiarisation easing was withdrawn in July 2025, so there is no grace period now. Late payment interest sits on top at 7.75%.
Agreeing a Time to Pay arrangement, or even proposing one, within the relevant window stops the penalty clock. That is worth knowing before you simply miss a payment.
Coming back out again
You can deregister voluntarily once your taxable turnover falls below £88,000. You must deregister within 30 days if you stop making taxable supplies altogether. Deregistration is not automatic and it is not always the right call, particularly if most of your customers are VAT registered businesses who do not care what you charge because they reclaim it.
The honest summary
Registration is not the disaster people expect. If you sell to businesses it is usually neutral or positive, because you reclaim VAT on your costs and your customers reclaim what you charge. If you sell to the public it is a real 20% problem, because you either absorb it or put your prices up. Knowing which of those you are is the conversation worth having before you cross the threshold, not after.
Let us handle your VAT from day one
We register you, choose the scheme that costs you least, set up digital records, and file every return. Fixed monthly fee.
Frequently asked questions
When do I register for VAT for the first time?
Once your taxable turnover passes £90,000 in a rolling 12 month period, or if you expect to pass it within the next 30 days. Registration is then compulsory.
What scheme should I choose?
It depends on your costs and customers. The standard scheme suits most, while the Flat Rate or cash accounting schemes suit particular situations. It is worth checking the maths first.
Do I need software to register for VAT?
You need Making Tax Digital compatible software to keep records and file returns, as most VAT returns can no longer be typed straight into the HMRC website.
Can I reclaim VAT from before I registered?
Often yes, on goods bought in the 4 years before registration that you still have, and services in the 6 months before, if used in the business.
What happens if I register late?
You are liable for VAT from the date you should have registered, even if you did not charge it, plus possible penalties. Monitoring your rolling turnover avoids this.