What is the VAT threshold and when do you need to register for VAT?
The VAT threshold is currently £85,000. Your business must register for VAT at the point that your rolling 12-month turnover exceeds this threshold.
Some businesses may choose to register for VAT voluntarily before they hit £85,000.
What is a rolling 12-month turnover?
It is the total you’ve received in sales income in the last 12 months.
Many people get caught out because they think the threshold applies to a calendar year or business trading year but that’s not the case.
Generally speaking, when your monthly income exceeds £6,500 you need to keep a close eye on things.
Our advice is to create a spreadsheet which shows the monthly turnover for the last 12 months, then each month you add the latest month’s total income to the bottom of the list and then deduct the income from the month at the top of the list, you’re always getting a total for the rolling 12 months.
For example:
| Month | Turnover | Rolling 12-month total | Rolling 12-month total | Rolling 12-month total |
| 1 | £5,000.00 | £81,920.00 | XXX | XXX |
| 2 | £5,100.00 | £84,770.00 | XXX | |
| 3 | £6,500.00 | £87,820.00 | ||
| 4 | £7,000.00 | |||
| 5 | £7,200.00 | |||
| 6 | £6,500.00 | |||
| 7 | £7,100.00 | |||
| 8 | £7,000.00 | |||
| 9 | £7,150.00 | |||
| 10 | £7,500.00 | |||
| 11 | £7,870.00 | |||
| 12 | £8,000.00 | |||
| 13 | £7,850.00 | |||
| 14 | £8,150.00 | |||
| 15 | £7,500.00 | |||
| 16 | £7,825.00 | Register for VAT from the 1st of this month | ||
When do you need to register from?
You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.
How do you register?
There’s an online form to complete, which can be found here – https://www.gov.uk/register-for-vat
How long does the VAT number take to arrive?
Currently the VAT registration number is posted to businesses within 4 weeks of the registration submission.
You should inform your customers straight away that you’re registering for VAT.
Can invoices be sent before the VAT number arrives?
Yes, you should start including a 20% uplift in your sales prices from the date of your VAT registration, however you cannot issue a VAT invoice until you have your VAT number.
The best way to manage this is to send customers a pro-forma document, this should include the VAT element. Then once your VAT number is confirmed you can re-send a VAT invoice.
For example:
Proforma Invoice
| Net | £1200 |
| Total | £1200 |
VAT invoice
(re-issued once the VAT registration number is confirmed)
| Net | £1000 |
| VAT @ 20% | £200 |
| Total | £1200 |
When will the first VAT return be due?
At the point of registering for VAT you will have selected which quarters you want to work within, these are the three months ending as follows:
- March, June, September, December
- April, July, October, January
- May, August, November, February
Your first VAT return will be at the end of the current quarter. You have a month and 7 days to prepare and file your VAT return. For example, a VAT quarter that ends on 30th June will need the VAT return to be filed by 7th August.
How are VAT returns filed?
HMRC requires all VAT returns to be prepared and submitted using Making Tax Digital compliant software.
At a4c we provide clients with Xero accounting software.
We love this software for its ease of use and efficiency when recording accounting transactions and having key business reporting at your fingertips.
More help
If you need to register for VAT or have any questions about the VAT registration process then please feel free to get in touch on 01737 652 852.