The threshold test
A business must normally register when taxable turnover for the previous 12 months goes over £90,000, or when it expects taxable turnover to exceed £90,000 in the next 30 days. The test is based on taxable turnover, not profit.
Because the first test is rolling, checking only at the accounting year end can identify the issue too late.
What counts
Standard-rated, reduced-rated and zero-rated sales can all be part of taxable turnover. Exempt and outside-the-scope income need separate consideration. One large contract can also trigger the forward-looking test before the invoice is fully paid.
Keep a monthly rolling total and flag unusual contracts, business transfers and overseas supplies for review.
Voluntary registration
A business below the threshold can choose to register. This may help where customers are VAT-registered and the business has meaningful input VAT, but it adds pricing, invoicing, record-keeping and filing responsibilities.
The decision should consider customers, margins, expected growth and the type of costs being incurred.
A practical next step
Review the last 12 months of taxable sales every month. Keep the calculation with the bookkeeping records and document why any income has been excluded.
Accountants4All can review turnover, registration timing and the practical bookkeeping changes needed before the first VAT return.
Official guidance
Rules and deadlines can change. Check the current official guidance and obtain advice for your circumstances.
GOV.UK: Register for VATNeed a clear next step?
Talk through the records, deadline or setup involved.
This article provides general information and is not personal tax, legal or financial advice.