VAT is one of the areas small businesses worry about most - and one where getting the timing right genuinely saves money. Here's when you have to register, when you might choose to, and what happens next.

When you must register

You must register for VAT if:

  • Your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the 2025/26 threshold - it's not your accounting year, it's any consecutive 12 months), or
  • You expect to go over £90,000 in the next 30 days alone.

That word "rolling" trips people up. You need to check your last 12 months every month, not just at your year end.

Registering voluntarily

You can register before you hit the threshold, and for some businesses it makes sense:

  • If your customers are mostly VAT-registered businesses, they can reclaim the VAT you charge - so registering costs them nothing and lets you reclaim VAT on your own purchases.
  • If you buy a lot of standard-rated goods or equipment, reclaiming that input VAT can be worth real money.

If your customers are mostly the public, though, adding 20% VAT can make you more expensive overnight - so voluntary registration needs thought.

Choosing a scheme

Once registered, the scheme matters:

  • Standard scheme - you charge VAT, reclaim VAT on purchases, and pay HMRC the difference.
  • Flat Rate Scheme - you pay a fixed percentage of your turnover and don't reclaim most input VAT. Simple, and for low-cost businesses it can be cheaper.
  • Cash Accounting - you account for VAT when you're actually paid, not when you invoice. Great for cash flow.
  • Annual Accounting - one return a year with instalments.

The right choice depends on your margins, your costs and who your customers are.

Making Tax Digital

All VAT-registered businesses must now keep digital records and file returns through Making Tax Digital (MTD)-compatible software - you can't use the old HMRC portal. It's straightforward once it's set up, and with BookEnu (free for our clients) it's handled automatically.

Get the timing and scheme right

Register a day late and you can face penalties; pick the wrong scheme and you overpay every quarter. At TaxMag we monitor your turnover, advise on the best time to register, choose the scheme that saves you the most, and file every MTD VAT return for you. Get in touch before VAT becomes a headache.

This article is general information, not tax advice. Thresholds change and your case is unique - talk to us for advice.