Registering for VAT for the first time can be somewhat puzzling. There are certain criteria your business needs to hit and various timescales you’ll need to adhere to. While getting started can seem daunting, our simple step-by-step guide is on hand to help you clear the hurdles.
So, if you’re registering for VAT now or are just preparing to sign up shortly, this helpful guide should cover everything you need to successfully register for VAT in 2023.
Contents:
- Define VAT
- Do I need to register for VAT?
- Should I register for VAT?
- Essentials for VAT registering
- How to register for VAT online
- How to register for VAT using a VAT1 form
- How much does it cost to register for VAT
- When should I register for VAT
Define VAT
VAT is the acronym for Value-Added Tax. It is known as the tax that is added and payable to goods or services sold within the UK. VAT is paid each time a product is sold. That means transactions between manufacturers, wholesalers, and retailers are also subject to VAT. As a business, you must pay VAT to VAT-registered suppliers. In the UK, VAT is typically already included in the price of goods and services.
Do I need to register for VAT?
Before you sink your teeth into this comprehensive guide - you first need to understand if and why you need to register for VAT.
You need to be registered for VAT if the 2022 taxable turnover of your business has reached or surpassed the current VAT threshold, as set by the UK government. The current VAT threshold is currently set at £85,000. If it hasn’t, you will still need to sign up if your taxable turnover is likely to do so in the coming year.
Note: The £85,000 threshold is fixed until 31 March 2024.
Should I register for VAT?
Has your turnover surpassed £85,000? Is it likely to in the coming months? If so, then you must register for VAT online. You can also electronically submit a VAT1 form.
You should also register if all of the following apply:
- You and your business are based outside of the UK.
- You supply any goods or services to the UK (or will in the next 30 days).
If your business has broken the threshold, or you decide not to register for VAT, the result could be an eye-watering fine from HMRC.
Can you voluntarily register for VAT?
It is also possible to voluntarily register for VAT if your business falls below the threshold. This can be a good option for those who work with already-registered businesses. It will also allow you to claim money back on business expenses.
The essentials you need to register:
Below, we’ve created an easy-to-follow guide to registering for VAT. Use the navigation links below:
- What do I need to register for VAT?
- How to register for VAT online
- How to register for VAT via VAT1
- How much does it cost to register for VAT?
- When should I register for VAT?
- When is the VAT registration deadline?
- Registering for VAT FAQ
What do I need to register for VAT?
To successfully register for VAT, you will need access to the following information:
- Government Gateway ID
- Business bank account details
- Business contact details
- Tax Reference number
- Nature of business and business details within the last two years
How to register for VAT online - Government Gateway ID
Registering for a VAT online account is easy to complete in just a few steps.
To register for VAT online, you first log into HMCR’s online system. You do this using your Government Gateway user ID and password.
However, if you’re a first-time user, you can create a Government Gateway user ID when you sign up.
- After logging into the system, head to the ‘Get another tax, duty or scheme’ section.
- Click the button beneath this and select VAT. Follow the final steps outlined by HMRC to complete your VAT registration.
- Once you’ve successfully signed up, you will receive a 9-digit number. You must include this on all invoices you raise VAT on.
You will also be sent information about when to submit your first return payment and also confirmation of your registration date. This will become your effective date of registration.
How to register for VAT online - no Government Gateway ID
Head to the Register for HMRC taxes page and cycle through the pages and stages. On the final page, click ‘create an account for me’.
Enter all of the requested details to create your Government Gateway ID. Then, follow the directions in the ‘How to register for VAT online - Government Gateway ID’ guide section.
How to register for VAT - VAT1 form
If you can’t register for VAT online, fill out a VAT1 form. This is available for download via the HMRC website.
You may need to fill out a VAT1 form if:
- You’re eligible for a VAT registration exemption.
- You’re joining the Agricultural Flat Rate Scheme.
- You want to register multiple businesses under various VAT numbers.
Note: If you choose to print and fill out a physical VAT1 form, you will still need to submit it electronically. This is because all newly VAT-registered businesses must submit all VAT returns and VAT payments online. Alternatively, you should be able to use an online editor like DocuSign or Adobe to edit and fill out the form electronically.
How much does it cost to register for VAT?
You’ll be pleased to know that there is no initial cost to you or your business when applying for VAT via the HMRC website in the UK.
However, when you are filing your tax return, various ways of doing it could incur costs.
These are:
- Hiring an accountant to complete your VAT return.
- Using high-quality accounting software.
Note: Your VAT return must be compliant with the Making Tax Digital (MTD) legislation. This law came into action in April 2022. It makes sure that UK businesses are keeping their VAT accounting records.
Once you are VAT registered, this fee (for an accountant or accounting software) is your business's responsibility to pay.
When is the next VAT return date?
The deadline for submitting your VAT return online is one calendar month and seven days after the end of an Accounting Quarter period. This is the quarterly deadline for your VAT if you file correctly.
You will also need time for the payment to hit HMRC’s account. So try not to leave it until the last minute.
When should I register for VAT?
So now you know why and how you should be applying for VAT - but when should you be signing up?
As aforementioned, you must register for VAT if your total VAT taxable turnover for the last 12 months was over the threshold. However - you must be sure to register within 30 days of the end of the month when you officially went over.
Therefore, your effective date of registration is the first day of the second month after you went over the £85,000 threshold.
What happens if I sign up later than 30 days?
If you fail to be VAT registered 30 days after going over the taxable turnover threshold, you will have to pay VAT on any sales made since the date you should have registered online.
Depending on how late you submit your VAT registration, HMRC may fine you and force you to pay a penalty.
For more handy business tips, see our blog.
