VAT threshold – What is the VAT threshold?
The VAT threshold is the amount of sales a business can make before it needs to register for VAT.
You must register for VAT if:
- VAT taxable turnover in the previous 12 months is more than the VAT registration threshold (The historic test), or
2. You expect to exceed the VAT registration threshold in the next 30 days alone (The future test).
If your sales in the last 12 months are more than £85k it’s likely you need to register for VAT. The easiest thing to do is to speak to your accountant and they can let you know.
What is the current UK VAT threshold?
The current VAT registration threshold is £85,000 and will remain at £85,000 until at least 31 March 2024.
However, you should check the threshold each year because it may change from 1 April each year.
Important dates for VAT Registration
If you breach the VAT threshold of £85,000 based on the historical test you must notify HMRC within 30 days from the end of the month in which the limit is breached. You charge VAT on supplies from the first day of the following month.
If you breach the VAT threshold based on the future test you must notify HMRC within 30 days of the day you believe the supplies in the next 30 days alone will exceed £85,000. VAT registration is immediate and you must charge VAT straight away.
If you register late:
- You will still have to pay VAT from the time you should have registered
- A penalty may be charged
Example of VAT registration using the historical test
Assume that at 30/04/2022 taxable turnover is £80,000 for previous 12 months – no need to inform HMRC since the turnover is less than the registration threshold of £85,000.
Assume that at 31/05/2022 taxable turnover is £86,000 for previous 12 months – need to inform HMRC since the turnover is more than the registration threshold of £85,000.
Must register for VAT by no later than 30 June 2022 (Within 30 days of end of month of breaching turnover threshold)
Charge VAT on supplies from 1 July 2022 (The first day of the following month)
What are the historical UK VAT registration thresholds?
The VAT registration thresholds for the past few years are as follows:
From 1 April 2013 79,000
From 1 April 2014 81,000
From 1 April 2015 82,000
From 1 April 2016 83,000
From 1 April 2017 85,000
The £85,000 threshold has been in place from 1 April 2017, and is not forecast to increase until at least 1 April 2024. The 2017 threshold hasn’t increased in line with inflation each year meaning more businesses need to register for VAT each year.
What are the historical UK VAT deregistration thresholds?
The deregistration threshold is the level of taxable turnover at which you can deregister from VAT.
The VAT deregistration thresholds for the past few years are as follows:
From 1 April 2013 77,000
From 1 April 2014 79,000
From 1 April 2015 80,000
From 1 April 2016 81,000
From 1 April 2017 83,000
VAT threshold and accounting schemes
HMRC allow some businesses to use VAT schemes to simplify the reporting process.
|Scheme||Turnover to join||Turnover to leave|
|Flat rate||Up to £150,000||Over £230,000|
|Cash accounting||Up to £1.35 million||Over £1.6 million|
|Annual accounting||Up to £1.35 million||Over £1.6 million|
What happens if I don’t register for VAT on time?
If you don’t register for VAT on time, you will be charged a penalty.
The penalty is worked out as a percentage of the VAT due (output tax less input tax), from the date when you should have registered to the date HMRC either received your notification, or became fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering:
|If you registered||Then the penalty rate will be|
|not more than 9 months late||5%|
|more than 9 months but not more than 18 months late||10%|
|more than 18 months late.||15%|
There is a minimum penalty of £50.
VAT threshold – Useful links:
VAT threshold – Accountants in Cheltenham
Every effort has been made to ensure the information in this page is accurate and up-to-date. However, no liability will be accepted should you rely on the information provided. Professional advice specific to your circumstances should be obtained.