I’m Self-Employed, Do I Need to Register for VAT?


If you’re a self-employed worker, then you know that taxes are your responsibility. In addition to knowing when to file and what type of allowances you may take, there is the issue of knowing whether or not to register for VAT.

This article will help you understand whether or not you must register for VAT.

Registering for VAT may not be mandatory for a self-employed business. Unless you have met the threshold (see: When you must register for VAT below), there are three things you should know before making the decision that’s right for you.

Know your business

If you are registered for VAT, then you have to add this tax to all applicable sales.

By definition, VAT will make these purchases more expensive (by 17.5%) than those that are not VAT-registered. The only other option is to decrease your profit to absorb the price increase.

Neither option may be particularly acceptable.

Know your customers

If your customers are mainly the general public, as opposed to businesses, they will not be registered for VAT.

Therefore having your business registered would not only put you at a price disadvantage as opposed to your competitors who are not registered, but most likely you would lose clients, and by extension profits, by increasing prices.

The good news, is if your customer base is mostly directed at the general public, you can usually avoid VAT altogether.

On the other hand, if your customers are registered for VAT (as is typical if your customers are other businesses), there is no disadvantage since they will be able to reclaim any VAT that you charge.

Know yourself

It’s not terribly difficult to register for VAT. However, there are legal standards associated with VAT. As a business owner, it will be your responsibility to ensure that your accounting records are completed in accordance with these standards.

Also, you’ll have to file every quarter. So if you’re not a person who feels you’ll be diligent or disciplined enough to keep your books in compliance, and you do not want the added expense of having an accountant in your employ, you many opt not to register.

When you must register for VAT

If your turnover is above the annual VAT threshold (currently £70,000), then you must register for VAT.

To be clear, VAT-taxable turnover is a sum of all the goods you’ve sold and services you’ve provided that belong to the group of VAT-taxable.

In the UK the government usually changes the VAT threshold once a year. The changes are announced in the Budget. That’s why you have to check your turnover regularly and see if it doesn’t outstrip the VAT threshold 2010. And if it does – you have to register for VAT.

In case your turnover hasn’t exceeded the threshold yet, but you think it will outstrip it in 30 days, you have to have to register for VAT also.

What is the benefit of registering for VAT?

If you must register, or just think you should be, you should be aware that there is a benefit to VAT registration. You can reclaim VAT on most business purchases. If you’re not registered for VAT, then no reclaim can be made.

Furthermore, if your business is one that will attract a regular refund of VAT, you’ll be offered the chance of receiving your repayment monthly and not quarterly. Unless the sums are considerable (i.e. more than £500 a month), you’re advised to resist monthly VAT Returns because attending to them monthly, rather than quarterly, can become a nuisance.

How do I register for VAT?

The easiest way to register for VAT is to do it online at www.hmrc.gov.uk. Go to the VAT page on the website where there is an online VAT registration service. Alternatively, you can contact your local HMRC office and arrange for an application form to be sent to you.

To inquire about how VAT may affect your business, you can ask a question. We’ll let you know how to arrive at the best solution for your business.


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