When do I have to register for VAT?

When your taxable turnover passes the registration threshold, which HMRC sets and occasionally changes. You can also register voluntarily. Check gov.uk for the current figure.

What is Making Tax Digital?

HMRC’s requirement for VAT registered businesses to keep digital records and submit returns through compatible software.

Should I look at the Flat Rate Scheme?

It can simplify VAT for some smaller businesses, but it does not suit everyone. Ask your accountant whether it would save you money.

← Answers

The VAT I collect isn’t mine. How do I stop spending it?

VAT you charge belongs to HMRC until you pay it over. Move it into a separate account every time a customer pays, so your balance shows only what is yours. You must register once your taxable turnover passes the VAT threshold, and most VAT registered businesses keep digital records and file through Making Tax Digital.

Why a strong balance can mislead you

Every invoice with VAT on it puts HMRC’s money in your account. After a good quarter the balance looks healthy, and part of it is owed. Spending it feels fine until the return is due.

A separate account, every time

Move the VAT into a second account whenever you are paid. Your main balance then shows the money you can actually use, and the quarter end stops being a scramble.

Reclaim the VAT you pay

VAT on your business purchases can usually be reclaimed against what you owe. Keep proper records so nothing is missed.

If you have already spent it

Contact HMRC before the deadline. Time to Pay arrangements are possible, and penalties and interest grow when returns or payments are late.

Also asked

When do I have to register for VAT?: When your taxable turnover passes the registration threshold, which HMRC sets and occasionally changes. You can also register voluntarily. Check gov.uk for the current figure.
What is Making Tax Digital?: HMRC’s requirement for VAT registered businesses to keep digital records and submit returns through compatible software.
Should I look at the Flat Rate Scheme?: It can simplify VAT for some smaller businesses, but it does not suit everyone. Ask your accountant whether it would save you money.

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