What is the VAT threshold in the UK?

Value-Added Tax or (VAT) is a tax on sales in the UK. The majority of the goods and services in the UK are subject to VAT, called output VAT. The business can also claim back most of the VAT charged by the suppliers, known as input VAT. However, some goods and services such as stamps, insurance, education etc. are exempted from VAT. VAT threshold is the limit of VAT taxable turnover fixed by the Government of the UK for the business, making it compulsory for the company to register for VAT. Suppose their turnover from the sale of VAT taxable items in any continuous 12 months period (not necessarily tax year) exceeds the VAT threshold limit or is expected to exceed the threshold limit. In that case, the business is expected to inform HMRC. 

 

At present VAT threshold in the UK is £85,000. If the turnover is less than the threshold limit, you may not be required to register for VAT; however, you may voluntarily register for VAT. To claim back input VAT on the goods and services bought, a business needs to be VAT registered. 

 

For registration purposes, the turnover figure can be reduced by the amount of VAT paid on stocks bought for re-sale. The reduced turnover figure should be used only to determine the obligation to register for VAT. VAT registered businesses with turnover exceeding threshold limits must file their VAT return to HMRC using MTD-compatible VAT software. In contrast, 

 

VAT registered companies having turnover below the threshold limit will be required to follow Making Tax Digital (MTD) rules for their first VAT return. For VAT registration, turnover exceeding the threshold limit in a period of 12 months is considered, and this threshold limit usually changes every year; therefore, it is necessary to check your Vatable sales regularly. However, if the business only makes VAT exempted sales, it cannot be registered for VAT. VAT bill is to be paid within 37 days of the end of each quarter. If the VAT bill is not paid on time, the business may be subjected to investigation or incur interest and penalties. 

 

When the turnover of a business crosses the current VAT threshold, it is obliged to register for VAT, and VAT registered companies must Charge VAT on goods and services they sell. They are required to pay VAT on goods and services they buy, submit VAT returns to HMRC and keep VAT record and VAT account. If the taxable turnover temporarily exceeds the threshold limit, it does need not register for VAT. If it can prove to HMRC that their taxable sales will be below the VAT threshold limit and will have to apply for registration “exception.” 

 

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