A Simple Guide to VAT for UK Business Owners
- Strength in Numbers
- May 12
- 2 min read
VAT (Value Added Tax) is one of those areas many business owners find confusing, but it doesn’t have to be. Whether you’re close to the VAT threshold or already registered, understanding the basics can help you stay compliant and in control.
What Is VAT?
VAT is a tax charged on most goods and services in the UK. As a business, you collect it from your customers and pay it to HMRC. You can also reclaim VAT on many of your business purchases.
When Do You Need to Register?
From April 2024, you must register if your VAT-taxable turnover exceeds £90,000 in a 12-month rolling period.
However, voluntary registration may be a smart move even if you're below the threshold. It can:
Let you reclaim VAT on expenses
Increase your credibility with customers and suppliers
Help you get ahead of future compliance
How Does VAT Work?
Say you sell a service for £100 + 20% VAT = £120. You collect £20 in VAT from your customer.
If you spent £30 on supplies (which included £5 VAT), you can reclaim that £5. So you pay HMRC the difference: £20 collected - £5 paid = £15 owed.
VAT returns are usually submitted every quarter using Making Tax Digital (MTD)-compliant software like Xero or QuickBooks.
Your VAT Responsibilities
Once registered, you must:
Charge VAT where appropriate
Keep digital records
Submit VAT returns on time
Pay any VAT owed by the due date
Different VAT Schemes
Depending on your business, a special VAT scheme might be more suitable:
Flat Rate Scheme – Pay a fixed percentage of your turnover
Cash Accounting Scheme – Only pay VAT when you receive payment
Annual Accounting Scheme – Submit one VAT return per year
The right scheme can save you time and improve cash flow.
Common VAT Mistakes
Missing deadlines
Charging VAT incorrectly (or not at all)
Not understanding VAT on overseas sales
Failing to update HMRC when details change
Avoiding these mistakes starts with good advice and good systems.
Need Help With VAT?
At Strength in Numbers, we help business owners like you:
Register (or deregister) for VAT
Choose the best VAT scheme
Stay compliant with MTD rules
File accurate VAT returns on time
If you're struggling with VAT, we’re here to help make it simple for you.
01902 632 627
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