Do I need to charge VAT?
You must register for and charge VAT once your VAT-taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect to cross £90,000 within the next 30 days alone. Until you hit that point, you do not charge VAT at all, and you must not add it to invoices or quote a VAT number.
Two separate tests trigger compulsory registration (GOV.UK: when to register):
- The backward look. At the end of each month, add up your taxable turnover for the previous 12 months. If it exceeds £90,000, you must register within 30 days of the end of that month. Registration takes effect from the first day of the second month after you went over.
- The forward look. If you expect your taxable turnover to go over £90,000 in the next 30 days on its own (for example, you've just won a large contract), you must register immediately, and registration takes effect from the date you realised.
Below the threshold you can still register voluntarily, which has real upsides for some businesses. More on that below.
How do I work out my taxable turnover?
Taxable turnover is the total value of everything you sell that is not VAT exempt or outside the scope of UK VAT. It is not the same as profit, and it is not the same as your total sales.
Include in the figure:
- Standard-rated sales (20%)
- Reduced-rated sales (5%)
- Zero-rated sales (0%) — these are still taxable supplies, so they count
- The value of goods you hire or loan to customers
- Business goods you use for personal reasons
- Building work over £100,000 your business did for itself
Leave out:
- VAT-exempt supplies (insurance, most financial services, postage stamps, education)
- Sales that are outside the scope of UK VAT (for example, some supplies to overseas customers)
- One-off sales of capital assets
The exempt-versus-zero-rated distinction trips people up. Zero-rated and exempt both mean no VAT is added to the price, but they are not the same thing. Zero-rated supplies are taxable at 0%, count towards your threshold, and let you reclaim input VAT. Exempt supplies sit outside VAT entirely, do not count towards the threshold, and carry no right to reclaim. The GOV.UK rates guide lists which category each type of supply falls into, and we break it down further in our UK VAT rates explained help article.
What are the VAT thresholds?
| Threshold | Figure | What it means |
|---|---|---|
| Registration | £90,000 | Register once rolling 12-month taxable turnover exceeds this (since April 2024) |
| Forward-look registration | £90,000 | Register if you expect to exceed this in the next 30 days alone |
| Deregistration | £88,000 | You can apply to cancel registration if turnover falls below this |
| Voluntary registration | Below £90,000 | Optional registration at any turnover level |
The threshold has been frozen at £90,000 since April 2024. If your turnover is hovering near the line, run the backward-look test at the end of every single month rather than waiting for the tax year to end. Crossing it without registering on time can mean penalties plus the VAT you should have charged.
Should I register for VAT voluntarily?
Voluntary registration makes sense for some businesses and is a poor deal for others. There is no single right answer; it depends on who your customers are and what you buy.
Register voluntarily when:
- Most of your customers are VAT-registered businesses. They reclaim the VAT you charge, so your prices effectively don't rise for them, and you get to reclaim VAT on your own purchases.
- You have significant VATable costs (equipment, stock, software, subcontractors) and want to reclaim that input VAT.
- A VAT number lends credibility, or you want to avoid a sudden price jump for customers the day you cross the threshold.
Think twice when:
- Most of your customers are consumers or non-registered businesses. They can't reclaim VAT, so adding 20% either makes you more expensive or eats into your margin.
- Your costs are mostly VAT-free (wages, rent, insurance), leaving little input VAT to reclaim.
- You'd rather avoid the admin of quarterly returns and digital record-keeping.
Whichever way you go, registration brings ongoing obligations, so factor in the time as well as the money.
What changes once I'm registered?
Once registered, you have to charge VAT on your taxable sales, file VAT returns (usually quarterly), and keep digital records. Practically, that means:
- Charge the correct rate on every taxable sale and pay the VAT collected to HMRC, minus the VAT you've paid on purchases.
- Issue proper VAT invoices. A VAT invoice must show a unique sequential number, your business name, address and VAT number, the invoice date (and the supply/tax point date if different), the customer's name and address, a description of the goods or services, the quantity, the unit price excluding VAT, the VAT rate per item, the total excluding VAT, the total VAT, and the total including VAT. The full list is on GOV.UK: VAT invoices.
- Keep digital records and file through software. Under Making Tax Digital for VAT, all VAT-registered businesses must keep digital records and submit returns using MTD-compatible software.
- Track your input VAT so you can reclaim it against the VAT you owe.
Our UK VAT feature ships with all four rates pre-configured, so you select the right rate per line item and the totals, VAT breakdown and HMRC-required fields are filled in automatically. If you're new to issuing invoices, the how to create an invoice guide walks through it step by step.
Should I use the standard scheme or the Flat Rate Scheme?
Most businesses use the standard scheme, where you charge VAT, reclaim VAT on purchases, and pay HMRC the difference. The Flat Rate Scheme is a simpler alternative for smaller businesses that can reduce admin and, for some, the VAT bill.
| Feature | Standard scheme | Flat Rate Scheme |
|---|---|---|
| Who can use it | Any VAT-registered business | VAT turnover up to £150,000 to join |
| How you calculate VAT | VAT charged minus VAT on purchases | A fixed % of your gross (VAT-inclusive) turnover |
| Reclaiming input VAT | Yes, on eligible purchases | Usually no, with a limited capital-goods exception |
| First-year perk | None | 1% discount on your flat rate in the first year of registration |
| Admin | More record-keeping | Simpler returns |
The flat percentage you pay depends on your trade sector. Because you generally can't reclaim input VAT under the Flat Rate Scheme, it tends to suit service businesses with low VATable costs, and works less well if you buy a lot of stock or equipment. Read the detail and check your sector rate on GOV.UK: VAT Flat Rate Scheme before joining, since the right choice depends on your numbers.
What if I'm not VAT registered?
If you're below the threshold and haven't registered voluntarily, you do not charge VAT — full stop. Your invoices show the price with no VAT line and no VAT number. You still have to issue clear, compliant invoices, just without any VAT.
A non-VAT invoice must include a unique identifying number, your name or trading name and address, the customer's name and address, a clear description of what you're charging for, the date the goods or services were supplied, the date the invoice was issued, and the amount(s) due. Sole traders must show their own legal name as well as any business name they trade under. These rules are set out on GOV.UK: invoicing and taking payment from customers.
In Invoify you'd simply build the invoice without applying a VAT rate (or mark items as Exempt where appropriate) using the invoice editor, and pick from HMRC-ready invoice templates so nothing required is missing. If your sales grow towards £90,000, watch the rolling 12-month figure closely so you register on time.
A few related points
A couple of situations sit alongside the basic VAT question:
- Late payment. Whether or not you charge VAT, B2B invoices paid late can attract statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 — the Bank of England base rate plus 8%, with fixed compensation per invoice. We cover the mechanics in how to calculate late payment interest, and Invoify can work it out for you via the late payment interest feature.
- Repeat clients. If you bill the same clients each month, recurring invoices keep your VAT treatment and numbering consistent without re-keying everything.
Putting it together
Charge VAT only once you've crossed the £90,000 threshold or registered voluntarily; below that, invoice the full amount with no VAT. Run the backward-look test monthly, decide whether voluntary registration helps based on your customers and costs, and pick the scheme that matches your numbers. For a fuller breakdown of which rate applies to what, see our UK VAT rates in 2026 guide.
Invoify keeps the four UK VAT rates built in and fills in every HMRC-required field automatically, on both the free plan and Invoify Pro, so getting the VAT right is one less thing to think about.
This article is general information, not tax advice. VAT rules change and your circumstances may differ — check the linked GOV.UK guidance or speak to an accountant before acting.