When should I charge VAT?

By

Chris Andreou

Contents

When should I charge VAT?When should I charge VAT?

You should charge VAT when your business becomes VAT registered-whether the registration is mandatory or voluntary.

VAT registration is mandatory when:

  • your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • you expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • your business had a taxable turnover exceeding £85,000 over the last 12 months

If you're thinking about registering for VAT voluntarily, these are the main benefits and downsides you should consider:

Benefits:

  • It enhances the perception of your business
  • Able to reclaim VAT

Downsides:

  • Administrative burden
  • It makes your goods or services seem more expensive
  • You may be faced with an unexpected VAT bill

You should charge VAT when your business becomes VAT registered—whether the registration is mandatory or voluntary.

VAT registration is mandatory when:

  • your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • you expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • your business had a taxable turnover exceeding £85,000 over the last 12 months

There are additional conditions for businesses selling goods in the UK using online marketplaces. We've covered this in detail in our guide to VAT for ecommerce businesses.

Read more of our free business tax guides

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