Can I charge VAT if I am not registered?

In the UK, VAT (Value Added Tax) is one of the most common business taxes, applied to most goods and services. However, not every business is allowed to charge it. You can only charge VAT if your business is officially registered with HMRC. Charging VAT without being registered is not just incorrect—it is illegal.

Whether you are self-employed, a sole trader, or running a limited company, understanding the VAT registration rules is vital to avoid costly mistakes and potential penalties. This article explains when you must register for VAT, what happens if you charge it without registration, and how to fix it if you make an error.

What VAT registration means

Registering for VAT allows your business to charge VAT on sales, reclaim VAT on purchases, and submit VAT returns to HMRC. Once registered, you receive a VAT registration number, which must appear on all VAT invoices and correspondence.

If you are not registered, you are not allowed to:

• Add VAT to your prices.

• Issue VAT invoices.

• Reclaim VAT on business expenses.

Even if you include VAT-style wording on your invoices by mistake, you are breaking HMRC rules.

The VAT registration threshold

In the UK, VAT registration is compulsory once your taxable turnover exceeds the threshold set by HMRC. As of 2025, that threshold is £90,000 in any rolling 12-month period.

This includes all income from taxable goods and services you supply in the UK, whether you are paid by businesses or individual customers.

If your turnover stays below £90,000, you do not have to register for VAT, although you can register voluntarily if it benefits your business—for example, if most of your customers are VAT registered and you want to reclaim VAT on your costs.

What happens if you charge VAT without being registered

Charging VAT without registration is a serious breach of HMRC regulations. It means you are effectively collecting tax you are not authorised to charge.

If HMRC discovers this, they can:

• Require you to repay all VAT you charged customers.

• Impose penalties and interest on the wrongly collected amounts.

• Investigate your business accounts to assess whether VAT should have been paid.

• In some cases, take enforcement action for tax evasion.

Even if the overcharging was accidental, you are responsible for refunding customers or paying HMRC the full amount you collected.

Example

Suppose a small design agency earns £70,000 a year and is not VAT registered. If it starts adding 20% VAT to its invoices and charging clients £84,000 total, it is breaking the law. HMRC would require the agency to pay back the £14,000 VAT collected, even though it cannot reclaim VAT on its own expenses.

This can lead to a large financial loss and damage to your reputation.

How to correct the mistake

If you have charged VAT without being registered, act quickly. HMRC looks more favourably on businesses that correct errors voluntarily.

Steps to take:

1. Stop issuing VAT-style invoices immediately. Remove any VAT references from your documents and website.

2. Identify all affected invoices. Calculate how much VAT you have charged in error.

3. Contact HMRC or your accountant. Explain the mistake and request guidance on repayment.

4. Refund customers where possible. If you charged VAT by mistake, you may need to issue credit notes or refunds.

5. Keep full records. Document your correction process in case HMRC reviews your accounts.

If you have been close to or above the threshold for some time, HMRC may decide that you should have been registered earlier. In that case, they will backdate your registration and require VAT to be paid on past sales.

Backdated VAT registration

If HMRC determines you should have been registered earlier, they will calculate the VAT you owe from the date your turnover first exceeded the threshold. You will then need to pay VAT on all sales made since that date, even if you did not charge your customers VAT at the time.

HMRC may allow you to recover some VAT on business expenses and purchases during that period, but you must provide supporting invoices and records.

Penalties may also apply depending on how long the delay was and whether it was deliberate or accidental.

Voluntary VAT registration

Even if your turnover is below £90,000, you can choose to register for VAT voluntarily. This is common in business-to-business industries where clients are VAT registered and can reclaim VAT.

Voluntary registration allows you to:

• Reclaim VAT on your business expenses.

• Appear more established and professional to clients.

• Prepare for future growth before hitting the threshold.

However, it also creates extra responsibilities: you must file VAT returns (usually every quarter), keep digital records under Making Tax Digital rules, and pay any VAT due to HMRC on time.

How to know when to register

To stay compliant, you must regularly monitor your turnover. The £90,000 threshold is based on any rolling 12-month period, not the tax year.

That means if your total taxable sales over the past 12 months reach £90,000 at any point, you must register within 30 days of the end of that month.

If you expect your turnover to exceed £90,000 in the next 30 days alone (for example, through a large contract), you must register immediately.

Failing to register on time can result in backdated VAT bills, interest, and penalties.

Penalties for not registering or charging VAT incorrectly

HMRC penalties depend on the nature of the error:

• Charging VAT without registration: You must repay all VAT collected and may face a penalty of up to 100% of the amount, depending on intent.

• Failing to register on time: You may owe backdated VAT plus interest and penalties based on how long you delayed.

• Issuing incorrect invoices: You must issue corrected invoices and keep copies for your records.

If HMRC believes your mistake was deliberate, they can increase penalties and extend their investigation to earlier years.

How to avoid VAT problems

Avoiding VAT errors is straightforward with good record keeping and regular financial reviews. Practical steps include:

• Track your rolling 12-month turnover every month.

• Use accounting software that alerts you when approaching the VAT threshold.

• Ensure invoices do not show VAT unless you are registered.

• Review your pricing and terms if you decide to register.

• Seek professional advice before making VAT-related decisions.

An accountant can help monitor your turnover, handle VAT registration, and ensure compliance with Making Tax Digital.

The bottom line

You cannot legally charge VAT unless your business is registered with HMRC. Doing so without registration can lead to serious financial and legal consequences, including repaying the VAT, paying penalties, and losing customer trust.

If you realise you have charged VAT by mistake or failed to register when required, act quickly. Correct the error, contact HMRC, and keep clear records. With professional support and regular monitoring, you can stay compliant, avoid penalties, and manage VAT confidently as your business grows.