When do I have to register for VAT as a sole trader?

Full answer

VAT registration is compulsory when your taxable turnover passes GBP 90,000 measured over any rolling 12 months, not just your accounting year. You must also register if you expect to exceed GBP 90,000 within the next 30 days alone. Once registered you charge VAT (standard rate 20%, reduced 5%, zero 0% on qualifying items) and can reclaim VAT on business purchases. Worked example: a sole trader's rolling 12-month turnover hits GBP 92,000. They must register and then add 20% VAT to standard-rated sales. On a GBP 1,000 invoice they charge GBP 1,200, of which GBP 200 is VAT owed to HMRC, less any input VAT reclaimed on expenses. If their customers are VAT-registered businesses they can reclaim it, so the impact is mainly administrative; if customers are the public, the 20% can effectively raise your prices or squeeze your margin. Watch the rolling window closely: a few strong months can tip you over even if the annual figure looks lower. Late registration means HMRC can backdate VAT you should have charged, leaving you to fund it yourself. Voluntary registration below GBP 90,000 can make sense if you buy a lot of standard-rated supplies and sell zero-rated goods, generating reclaims. Use the vat calculator to work out the VAT element of your prices, and confirm the threshold, scheme options like Flat Rate, and registration steps at gov.uk.

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