VAT registration guide: When and how to register for VAT

Want to find out all you need to know about registering for Value Added Tax (VAT)?

You’ve come to the right place.

It’s essential to understand VAT and what it means for your business, and be clear on the £85,000 VAT threshold. If VAT registration is on the cards for your business, you can register for VAT online.

And once your business is VAT registered, you’ll need to follow the Making Tax Digital rules and use MTD compatible VAT software to submit your VAT Returns.

Read this article to learn about VAT, including how to register for VAT, and discover the available VAT schemes.

Here’s what we cover:

• Who needs to register for VAT?
• Can you voluntarily register for VAT below the threshold?
• What are the benefits of registering for VAT?
• How do I register for VAT?
• Registering for VAT using the VAT1 form
• VAT schemes to choose from
• What happens when you register for VAT?
• FAQs on registering for VAT

Who needs to register for VAT?

You must register for VAT if the taxable turnover of your business has reached £85,000 (currently the VAT threshold) or more over the past 12 months, or it’s likely to do so in the coming year.

Failing to register for VAT online or using a VAT1 form when your turnover grows beyond £85,000 could result in a hefty fine from HMRC.

Can you voluntarily register for VAT below the threshold?

Yes. You can voluntarily register if your business has an annual taxable turnover of less than £85,000.

What are the benefits of registering for VAT?

You may want to register voluntarily to avoid paying VAT on business expenses—you can claim money back when you file your VAT Return.

Say you’re opening a café or starting a professional services company, and you need to buy chairs, tables, computers and stationery, among other items.

You can reclaim the VAT element of this expenditure from HMRC and pump that cash into the business before waiting for its turnover to exceed £85,000.

As well as this practical point, many businesses prefer their clients, suppliers and competitors not to know how big they are.

If you’re not VAT registered, they will know your turnover is less than £85,000.

Among the benefits of VAT registration is the image of gravitas and professionalism that it develops for your company.

Saying: “Am I VAT registered? Yes, of course,” makes it clear you’re a “proper” business in the eyes of many customers and suppliers.

Every quarter you must send your VAT returns to HMRC (unless you’re using a different VAT scheme, such as the Annual Accounting VAT Scheme—see the ‘VAT schemes to choose from’ section below).

Some businesses find this extra administration inconvenient, but you might like the fact that it forces you to regularly keep your books up to date.

How do I register for VAT?

There are two main ways to register for VAT: Register online or use a VAT1 paper form.

Thankfully, both approaches are straightforward if you have everything that you need to register.

What do I need to register for VAT?

To complete your VAT registration, you’ll need:

• Your business contact details
• Bank account details
• Unique Tax Reference number
• Details of your turnover and nature of business.

Registering for VAT online

To register for VAT, you need a Government Gateway ID—a series of 12 digits you use alongside a password to access the HMRC portal.

Your Government Gateway account is your VAT online account.

Registering for VAT online without a Government Gateway

• Go to the Register for HMRC taxes page, select the appropriate option, and then click the “next” button to go through the pages.
• On the final page, select “Create an account for me”.
• Enter your details to create your Government Gateway ID. Keep your user ID and password in a safe place as you’ll need to refer to them regularly.
• On the sign in page, enter your Government Gateway details.
• Once logged in, scroll down to the “Get another tax, duty or scheme” section of the page and click the button underneath this.
• Select VAT and follow the final steps to complete your VAT registration application.

Registering for VAT online if you have a Government Gateway

• Go to the Register for HMRC taxes page, select the appropriate option, and then click the “next” button to go through the pages.
• Select “I have an account – login” on the final page.
• On the sign in page, enter your Government Gateway details.
• Once logged in, scroll down to the “Get another tax, duty or scheme” section of the page and click the button underneath this.
• Select VAT and follow the final steps to complete your VAT registration application.

Registering for VAT using the VAT1 form

Most businesses can register online.

However, there are situations where you’ll need to register your business for VAT offline, such as when you’re:

• Applying for a VAT registration exemption
• Registering multiple business units under different VAT numbers
• Joining the Agricultural Flat Rate Scheme.

If you can’t register online, you’ll need to fill out a VAT1 form and send it to HMRC in the post.

VAT schemes to choose from

There are several different categories of VAT that you should investigate before you register for VAT.

If you have an accountant or a business adviser, you can ask them for help to become VAT registered and which scheme to choose.

Here are some VAT schemes to consider:

Annual Accounting VAT Scheme

With the Annual Accounting VAT Scheme, you can complete one VAT Return a year.

You’ll make advance VAT payments towards your VAT based on your last return or an estimated figure if you’re new to VAT.

VAT Flat Rate Scheme

The VAT Flat Rate Scheme is where certain businesses pay a percentage of their turnover as VAT—a more simplified VAT Return process.

Instead of deducting VAT on its inputs (in other words, what it buys), you deduct VAT on its outputs (what it sells).

It’s most relevant to companies that spend a small amount on goods and raw materials, such as service providers.

VAT Cash Accounting Scheme

With the VAT Cash Accounting Scheme, you only pay VAT once you’ve received payment from your customers.

You reclaim the VAT paid on purchases once you’ve paid your suppliers.

What happens when you register for VAT?

Once you’ve registered for VAT:

• The system will create a VAT online account for you, sometimes known as a Government Gateway account. This is where you will receive your VAT certificate. It takes up to 30 days to get it.
• The VAT certificate confirms your VAT number and tells you when you will need to submit your first VAT Return and payment.
• You’re then ready to submit your VAT Returns. You’ll usually receive automatic reminders from VAT about when to do this.
• Your VAT accounting starts from the date you were obliged to register for VAT because you hit the £85,000 threshold or the time you decided to register voluntarily.

FAQs on registering for VAT

How do I submit my VAT Return?

If you’ve registered or will register for VAT, you need to submit your VAT Returns with Making Tax Digital (MTD).

You can get up to speed with MTD with our checklist.

Can I register for VAT with no turnover?

You can register for VAT voluntarily before turnover creates an obligation to register.

You may want to do this to recover VAT in start-up costs.

How long does it take to register for VAT?

You should get a VAT registration certificate within 30 working days, though it can take longer.

Do I need a Government Gateway account to register for VAT?

Yes, your Government Gateway account is your VAT online account if you register online.

You don’t need an online account if you are registering by post.

How do you register for VAT when you are self-employed?

You must register for VAT as outlined in this article if your turnover reaches over £85,000 in a year.

How do you register for VAT as a sole trader?

Same as if you’re self-employed.

You must register for VAT as outlined in this article if your turnover reaches over £85,000 in a year.

How much does it cost to register for VAT?

There is no VAT registration cost.

That doesn’t count what you may need to pay for an accountant if they complete your VAT Return.

Editor’s note: This article was first published in November 2018 and has been updated for relevance.