VAT Threshold
The VAT threshold is the annual turnover level above which a business must register for VAT with HMRC. The threshold is currently £90,000 (from April 2024). Once registered, businesses must charge VAT at the appropriate rate (standard 20%, reduced 5%, or zero) on taxable supplies, file periodic VAT returns, and pay any VAT due. Businesses below the threshold may register voluntarily to reclaim input tax.
The compulsory VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period (from 1 April 2024). Businesses must register within 30 days of exceeding the threshold and start charging VAT from the first day of the following month. The deregistration threshold is £88,000. Making Tax Digital (MTD) for VAT requires all VAT-registered businesses to keep digital records and submit returns using MTD-compatible software. VAT returns are typically filed quarterly, with payment due one month and seven days after the period end. The Flat Rate Scheme is available to businesses with taxable turnover up to £150,000, simplifying accounting by applying a fixed percentage to gross turnover. Businesses making only exempt supplies (such as most financial services or residential lettings) cannot register for VAT and cannot recover input tax.