As of 1 April 2024, UK businesses must register for VAT if their taxable turnover exceeds £90,000 in a rolling 12-month period, not £85,000. Once registered, you must charge VAT on all taxable goods and services, but not necessarily everything you sell, as some items are exempt, zero-rated, or reduced-rated.
The standard VAT rate is 20%. It applies to most goods and services. The reduced VAT rate is 5% — this applies to goods and services like some health products, fuel, heating and car seats for children. Zero-rated goods and services include most food, books and clothes for children.
No, you do not pay VAT on all turnover. VAT is only charged on taxable sales, and only after your business is VAT-registered. Some goods and services are VAT-exempt, meaning VAT is never applied to them. Additionally, if your business is not VAT-registered, you do not charge or pay VAT on any of your turnover.
The VAT registration and deregistration thresholds will increase from 1 April 2024. The 12-month taxable turnover threshold which determines whether a person must be registered for VAT will increase from £85,000 to £90,000.
The UK VAT threshold, also known as the VAT registration threshold, dictates when businesses making taxable supplies or relevant acquisitions must register and account for VAT (Value-added Tax). On 1 April 2024, the threshold was increased from £85,000 to £90,000 per year.
Do You Have to Pay VAT on Your First £85,000 to HMRC 2023/2024 (Ltd) Limited Company
How to avoid the VAT threshold?
To avoid the VAT threshold (around £90,000 in the UK), businesses can try strategies like limiting turnover, splitting into separate, genuinely independent businesses, or incorporating a new company, but these must be legitimate and not just artificial tax avoidance, which HMRC scrutinizes heavily. The key is ensuring separate operations with different finances, staff, and premises, but it's complex and often better to seek professional advice from an accountant to manage potential competitive disadvantages or legal issues.
If your business has exceeded the VAT threshold in the last 12 months, or you expect it to in the next 30 days, then you are legally required to register for VAT. Even if you go over the threshold temporarily, you are still expected to register.
In the UK, the current VAT threshold is £90,000. This increased from £85,000 in April 2024. If your taxable turnover exceeds this threshold in any 12-month period, you must register for VAT. Your taxable turnover is the total value of everything your business sells that's not exempt from VAT.
Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences.
VAT is charged on things like: goods and services (a service is anything other than supplying goods) hiring or loaning goods to someone. selling business assets.
VAT (Value Added Tax) is paid to HMRC by all limited companies that register for it. You must register for VAT if the value of your taxable supplies go over the current VAT threshold. Limited companies with a turnover below the current threshold do not need to register for VAT. Some, however, choose to do so.
VAT is calculated based on your taxable turnover, not your profit. That means it applies to the total value of your VATable sales, regardless of your expenses or how much profit you actually make. Profit is relevant for income or Corporation Tax, but VAT is purely based on the value of goods or services sold.
You can calculate the total price excluding the standard VAT rate (20%) by dividing the original price by 1.2. To work out the reduced VAT rate (5%), divide the original price by 1.05.
VAT is levied at the standard rate of 15% on the supply of goods and services by registered vendors. The rate was to increase to 15.5% from 1 May 2025 and to 16% from 1 April 2026 but this is reversed by clause 13 of the Bill introduced on 24 April 2025.
It gives your business credibility: Registering for VAT can make your business appear more legitimate and trustworthy to clients and investors, creating a positive image for your business. It may be better for business: Similarly, some businesses only work with other businesses that are VAT-registered.
To avoid the VAT threshold (around £90,000 in the UK), businesses can try strategies like limiting turnover, splitting into separate, genuinely independent businesses, or incorporating a new company, but these must be legitimate and not just artificial tax avoidance, which HMRC scrutinizes heavily. The key is ensuring separate operations with different finances, staff, and premises, but it's complex and often better to seek professional advice from an accountant to manage potential competitive disadvantages or legal issues.
HMRC VAT investigations are triggered by data anomalies, compliance failures, and high-risk business profiles, often flagged by their risk-assessment software looking for inconsistent figures, large repayment claims, late filings, sector-specific risks (like construction or hospitality), or third-party mismatches, with tip-offs or lifestyle discrepancies also raising flags.
How to avoid a double payment of VAT? To avoid the UK customer paying the VAT twice when the consignment has a value of more than GBP 135, the solution that seems most obvious is simply not to charge VAT at the time of sale and let the carrier charge the VAT to the customer at the time of delivery.
Shipping your purchases home directly from the retailer is another way to avoid paying VAT, but the added cost may outweigh any savings. You can try to get your VAT refund through the mail but the process takes much longer and can be unreliable. Most people submit their requests at the airport on their way home.
Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT. Financial services: Many financial services, like insurance and banking, are VAT-exempt. Charitable activities: Donations and activities carried out by registered charities may be exempt from VAT.
To get the product VAT free your disability has to qualify. For VAT purposes, you're disabled or have a long-term illness if: you have a physical or mental impairment that affects your ability to carry out everyday activities, for example blindness. you have a condition that's treated as chronic sickness, like diabetes.
