How to know if you need to register for VAT

The Value Added Tax (VAT) threshold is £90,000, this means that you must register for VAT if: 

• your total taxable turnover for the last 12 months goes over £90,000, or 
• you expect your taxable turnover to go over £90,000 in the next 30 days 

When your turnover for the last 12 months goes over the VAT registration threshold of £90,000, you have 30 days from the end of the month when you went over the threshold to register.  

As an example: 

• during March, your annual income exceeds the threshold 
• you have until 30th April to register for VAT 
• your date of VAT registration is 1st May 

When you realise your turnover is going to exceed £90,000 in the next 30 days, you must register by the end of that 30-day period.  

As an example: 

• on 1st March you realise you will exceed the threshold in the next 30 days 
• you must register by 30th March  
• your date of VAT registration is 1st March 

Monitoring your turnover for VAT registration 

Constantly monitoring your turnover is vital to ensuring you register for VAT on time. You must keep a constant eye on your current turnover over the past 12 months. You cannot rely on the turnover shown in your latest accounts. 

If you take on a large contract or sale, then it is important you understand how this could impact your turnover. This could mean that you need to register for VAT earlier than you thought or had planned. 

The rolling 12-month basis means you should check your annual turnover between today and 12 months ago. Then, in a few weeks' time, it is your annual turnover between that day and 12 months ago. 

If you are using a digital accounting system (such as QuickBooks and Xero) then it is likely you will have access to reports. Certain reports will enable you to clearly see your turnover over the past 12 months Of course, the accuracy of your records will determine the usefulness of any reports. 

 

What if you do register late for VAT? 

You could face large VAT bills and penalties if you register late for VAT. You must complete multiple VAT returns from the date you should have registered for VAT. Keeping a regular eye on your turnover and registering in time could help avoid massive problems. 

Finding the money to pay your VAT bill 

When you register for VAT, you will have to report your income and pay VAT from when you should have registered. If the bill is completely unexpected, the money may be hard to find as you are unlikely to have budgeted for the expense. 

Penalties 

Late submission penalties 

Late submission penalties do not apply to your first VAT return if you are newly VAT registered. 

For other returns, the penalties you pay depend how much you VAT owe and how late your VAT return is. VAT penalties work on a points system and from January 2023, each late VAT return gives you a penalty point. Once you reach the ‘penalty point threshold,’ you will receive a £200 penalty. Once you have reached the penalty threshold, any subsequent late return will incur a further £200 penalty. 

You can remove penalty points once you have met the threshold by completing a period of compliance: 

• submitting all returns by the deadline 
• submitting all outstanding returns for the previous 24 months 

A period of compliance is 24 months if you are filing annual VAT returns, 12 months for quarterly VAT returns and 6 months for monthly VAT returns. 

Accounting period	Penalty points threshold
Annually	2
Quarterly	4
Monthly	5

Late payment penalties 

The late payment penalty you pay will depend on how late you pay: 

• 16 days late - the penalty starts at 2% of the VAT due 
• 30 days late - a further 2% of what VAT was outstanding at day 15 
• 30 days late - a further 2% on what VAT is outstanding at day 30 
• 31 days late - a daily rate of 4% per year until the amount is paid 

You will also be charged late payment interest until you pay. 

If you have registered for VAT late, filed a late VAT return or are late paying your VAT bill, it is important you speak to HMRC as soon as possible. Collaborating with an accountant will help ensure your VAT returns are prepared correctly and on time in the future. 

How can TaxAssist Accountants help? 

Our experts have experience in VAT, so speak to our friendly team today. Do not bury your head in the sand, speak to our proactive accountants to get your finances professionally managed. Call us today on 0121 725 4125 or use our online contact form. 

 

 

Date published 20 Nov 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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