Should I register for VAT voluntarily?

You can register voluntarily below the £90,000 threshold. The upside: you can reclaim VAT on your business purchases and equipment, and it can make a small business look more established. The downside: you must add 20% VAT to your prices, which matters if your customers are the public or small businesses that can't reclaim it — it effectively makes you dearer. If your customers are mostly VAT-registered businesses, voluntary registration often makes sense; if they're consumers, it may not. Consider getting an accountant's view.

VAT for small businesses explained: the £90,000 threshold, the rates and when to register

Q: Do I need to register for VAT?

You must register for VAT if your total VAT-taxable turnover for the last 12 months goes over £90,000 (the 2024/25 threshold, frozen), or if you expect to go over £90,000 in the next 30 days alone. It's a rolling 12-month total, not your accounting year. If you go over on turnover, you must register within 30 days of the end of the month you went over. You can also register voluntarily below £90,000. Registration is free and done online through your business tax account.

Q: How does VAT work?

Once registered, you charge VAT on what you sell (output VAT) — usually 20% — and you can reclaim the VAT you pay on business purchases (input VAT). Each VAT period (usually quarterly) you pay HMRC the difference: output VAT collected minus input VAT reclaimed. If you paid more VAT than you charged, HMRC refunds the difference. You must show VAT separately on your invoices and keep digital VAT records under Making Tax Digital.

Q: What are the VAT rates?

There are three rates: the standard rate of 20% on most goods and services; a reduced rate of 5% on things like home energy, children's car seats and some energy-saving materials; and a zero rate (0%) on most food, children's clothes, books and newspapers. Some things are 'exempt' (such as insurance, finance, education and postage) — that's different from zero-rated, because you can't reclaim VAT on costs relating to exempt supplies.

Q: What is Making Tax Digital for VAT?

Making Tax Digital (MTD) for VAT applies to all VAT-registered businesses. You must keep your VAT records digitally and file your VAT returns using MTD-compatible software rather than typing figures straight into the HMRC website. Most accounting software handles this. There are also optional simplification schemes — such as the Flat Rate Scheme for smaller businesses — that can make VAT easier to work out, though whether they save money depends on your costs.

Do you need to register?

You must register for VAT if either of these is true:

Your VAT-taxable turnover over the last rolling 12 months goes over £90,000 (not your accounting year — a moving 12-month total), or
You expect to go over £90,000 in the next 30 days alone (for example a big one-off contract).

If you cross the threshold on turnover, you must register within 30 days of the end of the month you went over. Registration is free and done online through your business tax account.

Watch the rolling totalBecause it’s a 12-month rolling figure, a good few months can tip you over without you noticing. Keep an eye on your running total as you approach £90,000 — registering late can mean penalties and paying VAT you never charged.

How VAT actually works

Once registered, VAT flows through your business in two directions:

Output VAT — the VAT you charge on your sales (usually 20%), which you collect from customers on HMRC’s behalf.
Input VAT — the VAT you pay on business purchases and equipment, which you can usually reclaim.

Each VAT period (usually every quarter) you file a return and pay HMRC the difference: output VAT collected minus input VAT reclaimed. If you paid more VAT than you charged, HMRC refunds the difference. You must show VAT separately on invoices.

It’s not your moneyThe VAT you charge isn’t income — it’s collected for HMRC. Keep it aside so you can pay each quarter’s bill without a shock.

The rates

Rate	Applies to
20% — standard	Most goods and services
5% — reduced	Home energy, children’s car seats, some energy-saving materials
0% — zero-rated	Most food, children’s clothes, books and newspapers
Exempt	Insurance, finance, education, health, postage

Zero-rated is not the same as exempt. Zero-rated sales are still “taxable” (at 0%), so you can reclaim VAT on your costs. Exempt sales aren’t taxable, so you generally can’t reclaim the VAT on costs relating to them.

Should you register voluntarily?

You can register below £90,000 if you want to. It’s a genuine trade-off:

Upside	Downside
Reclaim VAT on purchases & equipment	You must add 20% to your prices
Can look more established to clients	More admin + quarterly returns
Good if your customers are VAT-registered	Makes you dearer to consumers who can’t reclaim

Rule of thumb: if your customers are mostly VAT-registered businesses (who reclaim the VAT you charge), voluntary registration often pays. If your customers are the public or non-registered small firms, adding 20% can just make you more expensive. Worth an accountant’s view.

Records, returns & schemes

Making Tax Digital (MTD) for VAT applies to all VAT-registered businesses: keep your VAT records digitally and file returns using MTD-compatible software (most accounting software does this). There are also optional simplification schemes:

Flat Rate Scheme — for smaller businesses; you pay a fixed percentage of turnover instead of tracking every input VAT figure. Simpler, but only saves money for some.
Annual / Cash accounting schemes — can smooth cash flow (pay VAT when customers actually pay you).

Not sure if you’ll cross the line?HMRC has a free VAT Registration Estimator that helps you work out the impact of registering. Combine it with a quick chat with an accountant before you decide.

What to do

Do this now

Add up your VAT-taxable turnover for the last 12 months. Over £90,000 (or about to be)? Register free at gov.uk/register-for-vat within 30 days. Under it and thinking about voluntary registration? Weigh who your customers are first.

Setting up? See our start a business guide and the business action centre; if you file your own tax, our Self Assessment guide covers the rest.

Related guides — business & self-employed

Start a business Self Assessment Business rates relief Business funding Business hub

Source verification Primary sources: GOV.UK — Register for VAT: When to register (gov.uk/register-for-vat); How VAT works and VAT thresholds (gov.uk/how-vat-works); and the HMRC policy paper on increasing the registration & deregistration thresholds. Last verified 2 July 2026 — the £90,000 registration threshold and £88,000 deregistration threshold (both from 1 April 2024, frozen), the rolling-12-month + next-30-days tests, the 30-day registration deadline, the 20% standard / 5% reduced / 0% zero rates and the exempt category, voluntary registration, Making Tax Digital for VAT and the Flat Rate Scheme were web-checked against GOV.UK. Confidence: High — published HMRC thresholds and rates; note VAT thresholds and rates are set by the government and can change at a Budget. Scope: UK-wide (VAT is a UK tax, not devolved). Not financial advice — use HMRC’s VAT Registration Estimator or an accountant for your situation.

VAT — common questions

Do I need to register for VAT?

Yes if your VAT-taxable turnover over the last rolling 12 months goes over £90,000, or you expect to pass £90,000 in the next 30 days alone. Register within 30 days of the end of the month you went over. You can also register voluntarily below the threshold.

How does VAT work?

You charge VAT on sales (output VAT, usually 20%) and reclaim VAT on business purchases (input VAT). Each quarter you pay HMRC the difference, or get a refund if you paid more than you charged. Show VAT separately on invoices and keep digital records.

What are the VAT rates?

20% standard on most things; 5% reduced on home energy and some items; 0% zero-rated on most food, children’s clothes and books. “Exempt” (insurance, finance, education, postage) is different — you can’t reclaim VAT on exempt-related costs.

Should I register voluntarily?

Often worth it if your customers are VAT-registered businesses who reclaim the VAT you charge. Less so if your customers are the public, because adding 20% makes you dearer. You’d gain input-VAT reclaims but take on more admin. Get an accountant’s view.

What is Making Tax Digital for VAT?

All VAT-registered businesses must keep VAT records digitally and file returns via MTD-compatible software. Most accounting software handles it. Optional schemes like the Flat Rate Scheme can simplify things, but only save money for some businesses.

Sources: Thresholds, when to register, how VAT works and the rates · GOV.UK — Register for VAT and How VAT works. SortedUK is not a regulated adviser and this is general information. Last reviewed: 2 July 2026.

VAT — when to register, and how it works