Can Sole Traders Claim Back VAT

Can sole traders claim back VAT in the UK? Learn how VAT registration works, what can be reclaimed and when it makes financial sense.

If you are self-employed and run your business as a sole trader, you may have wondered whether you can claim back VAT on your expenses. This is especially relevant if you regularly buy goods or services from VAT-registered suppliers.

The simple answer is yes – sole traders can claim back VAT on their business purchases, but only if they are registered for VAT with HMRC. Registration is not automatic and it comes with responsibilities, so the decision to register should be based on your business size, sector and expected growth.

This article explains when and how sole traders can claim VAT back, what types of costs qualify, and the pros and cons of registering voluntarily if your turnover is below the threshold.

When Can a Sole Trader Claim VAT?

You can only reclaim VAT on your expenses if you are VAT registered. This means:

  • You have applied to HMRC for a VAT number

  • You charge VAT on your taxable sales

  • You file regular VAT returns (usually quarterly)

  • You keep VAT-compliant records and invoices

Once registered, you can reclaim VAT on purchases made for your business, provided they meet HMRC’s usual rules.

If you are not VAT registered, you cannot claim VAT back, even if your suppliers charge it on their invoices. The VAT paid simply becomes part of your cost of doing business.

When Do Sole Traders Have to Register for VAT?

VAT registration is compulsory if your VAT taxable turnover exceeds the VAT threshold, which is currently £90,000 over any rolling 12-month period. You must register within 30 days of exceeding this threshold.

You can also voluntarily register if your turnover is below this level. Many sole traders choose to register early if:

  • They regularly incur VAT on business expenses

  • Their clients are also VAT registered and can reclaim the VAT they charge

  • They want to appear more established or professional

Voluntary registration gives you the ability to claim back input VAT, but it also requires you to charge VAT on your sales and deal with more admin.

What VAT Can Sole Traders Reclaim?

Once registered, you can reclaim input VAT – the VAT you pay on goods and services used in your business. This includes:

  • Office supplies and equipment

  • Tools and materials

  • Software subscriptions

  • Advertising and marketing services

  • Accountancy and legal fees

  • Rent or lease of business premises

  • Phone and internet bills

  • Travel and subsistence (where allowed)

To reclaim VAT, the goods or services must be used wholly or partly for business purposes, and you must have a valid VAT invoice showing the supplier’s VAT number and the amount charged.

If an expense is for both business and personal use (such as a mobile phone or home broadband), you must apportion the cost and only reclaim the business portion.

You cannot reclaim VAT on:

  • Client entertainment

  • Most business cars (unless specifically used for qualifying purposes)

  • Goods bought for resale that do not include VAT

  • Items used entirely for personal purposes

  • Business gifts over certain thresholds

Claiming VAT on Purchases Made Before Registration

HMRC allows newly registered businesses to reclaim VAT on eligible purchases made before registration, provided certain conditions are met:

  • Goods must have been bought within four years and still be in use

  • Services must have been purchased within six months

  • You must have VAT invoices and the items must relate to your business

This is known as pre-registration input VAT. It can be reclaimed on your first VAT return. You must be able to show that the purchases were for business use and still contribute to your current trading.

For example, if you bought a laptop two years ago that you still use for work, and you now register for VAT, you may be able to claim the VAT back if you have the invoice.

How Does VAT Work for Sole Traders?

Being VAT registered means you are acting as a collector of VAT on behalf of HMRC. You must:

  • Charge VAT on your sales (known as output VAT)

  • Pay VAT on your purchases (input VAT)

  • File VAT returns (usually every three months)

  • Pay the difference between output and input VAT to HMRC

If your input VAT is higher than your output VAT, you can claim a repayment from HMRC. If your output VAT is higher, you will need to pay the difference.

This can be helpful for sole traders who incur large upfront costs, such as purchasing stock, tools or vehicles. In the early stages of a business, this may result in VAT refunds.

Flat Rate VAT Scheme: An Option for Simplicity

Sole traders with a turnover under £150,000 (excluding VAT) can join the Flat Rate VAT Scheme, which simplifies the VAT process.

Instead of reclaiming VAT on individual purchases, you:

  • Charge standard VAT on your sales (usually 20%)

  • Pay HMRC a fixed percentage of your gross turnover, based on your business type

  • Keep the difference as profit, depending on your cost structure

This scheme is popular with sole traders who have low VAT costs or want to reduce admin. However, if your business has high expenses with VAT, the standard VAT scheme may be more beneficial.

If you use the limited cost trader category under the flat rate scheme, you pay a higher flat rate (usually 16.5%), which can reduce the benefit.

Should Sole Traders Register for VAT Voluntarily?

There is no one-size-fits-all answer. Voluntary VAT registration can make sense if:

  • Your clients are VAT registered and do not mind paying VAT

  • You purchase goods and services with VAT that you can reclaim

  • You want to appear more established or work with larger companies

  • You have high start-up costs and expect to receive VAT refunds

However, it may be less suitable if:

  • You sell mostly to the public or non-VAT registered customers (as it increases your prices)

  • Your expenses do not include much VAT

  • You want to keep your admin as light as possible

Before registering, it’s important to run the numbers. If you mainly serve domestic customers or individuals, charging VAT may make you less competitive.

What Records Do VAT Registered Sole Traders Need?

If you register for VAT, you must:

  • Keep digital VAT records under Making Tax Digital (MTD) rules

  • Submit VAT returns using MTD-compliant software

  • Retain invoices and receipts for all business transactions

  • Separate business and personal expenses clearly

Poor record-keeping can lead to errors, penalties or missed reclaim opportunities, so it is worth using accounting software or hiring a professional bookkeeper.

Summary: Can Sole Traders Claim Back VAT?

Yes, sole traders can claim back VAT if they are VAT registered. You can reclaim VAT on business expenses that meet HMRC’s criteria, and you may even be able to recover VAT on goods and services bought before you registered.

However, claiming VAT is only possible if you are officially registered, charge VAT on your sales, and meet your obligations for record keeping and VAT returns.

If your turnover is below the registration threshold, voluntary registration can still be worthwhile – but it is not always the best option, especially if your customers are not VAT registered.

Weigh up the benefits and responsibilities carefully, and seek professional advice if you are unsure. Proper planning and clear records will ensure you claim the right amount of VAT and stay on the right side of the rules.