VAT Threshold: When to Register and What It Changes
The VAT threshold decides when you must register and start charging VAT. Understanding it avoids accidental penalties.
When to register
- Track rolling 12-month taxable turnover.
- Threshold is currently £85,000 (check HMRC for updates).
- Register within 30 days of crossing it.
- Option to register voluntarily if clients reclaim VAT.
What changes
- Add VAT to invoices.
- File VAT returns quarterly.
- Keep digital records under MTD rules.
- Pricing must reflect VAT impact.
Example
Sam’s freelance turnover hits £87,000. He must register. Charging 20% VAT means a £1,000 job becomes £1,200 for non-VAT clients.
Options
- Flat Rate Scheme simplifies calculations.
- Cash accounting aligns VAT with payments.
Checklist
- Review turnover monthly.
- Forecast future jobs to avoid surprises.
- Communicate VAT changes to clients.
- Pick VAT scheme before registering.