Do I need to register for VAT if I am self employed?

Find out whether you need to register for VAT if you are self employed. Learn the current VAT threshold, voluntary registration options, and how VAT affects sole traders in the UK.

If you work for yourself, whether as a freelancer, consultant, or small business owner, VAT (Value Added Tax) might not be the first thing on your mind. But once your business starts to grow, understanding when and how to register for VAT becomes essential.

Being self employed does not automatically mean you must register for VAT. It depends on your taxable turnover, the nature of your business, and sometimes, whether registering voluntarily could actually benefit you.

This article explains the VAT registration rules for self employed people, including the threshold, exceptions, and what happens once you are registered.

What is VAT and who needs to register?

VAT is a tax charged on most goods and services sold in the UK. Businesses that are registered for VAT collect this tax on behalf of HMRC and pay it over periodically through VAT returns.

As a self employed person, you are considered a business in your own right. You must register for VAT if your taxable turnover exceeds the VAT registration threshold set by HMRC.

The current VAT threshold (as of April 2025) is £90,000 in any rolling 12-month period. This means that once your total sales of VATable goods and services exceed £90,000 over the last 12 months, you are legally required to register for VAT.

When you must register for VAT

You must register for VAT with HMRC if:

  1. Your total VATable turnover has gone over £90,000 in the past 12 months.

  2. You expect your turnover to go over £90,000 in the next 30 days alone (for example, if you win a large contract).

If you meet either of these conditions, you must register within 30 days of the end of the month when you exceeded or expect to exceed the threshold.

Once registered, you must start charging VAT on all eligible sales and submit regular VAT returns.

What counts towards the VAT threshold

Your taxable turnover includes:

  • Sales of goods and services that are subject to VAT at the standard, reduced, or zero rate.

  • Income from UK-based customers.

It does not include:

  • VAT-exempt income, such as rent from residential property or certain financial services.

  • Income from outside the scope of UK VAT, such as some international work.

  • Money that is not payment for goods or services, like loans or grants.

It’s important to track your turnover on a rolling 12-month basis—not just by tax year—to ensure you register on time.

Voluntary VAT registration

Even if your turnover is below £90,000, you can choose to register voluntarily. This can be beneficial if:

  • You work mainly with VAT-registered clients who can reclaim VAT you charge them.

  • You want to reclaim VAT on business purchases, such as equipment, software, or rent.

  • You want to appear more established and professional.

However, voluntary registration also increases your administrative responsibilities. You must file VAT returns (usually quarterly), keep digital records, and account for VAT on all sales.

If most of your customers are members of the public who cannot reclaim VAT, voluntary registration might make your prices less competitive.

When you do not need to register

You do not need to register for VAT if:

  • Your taxable turnover stays below the £90,000 threshold.

  • You only sell VAT-exempt goods or services.

  • Your work is entirely outside the scope of UK VAT (for example, certain overseas services).

However, you must still monitor your turnover monthly. Once you exceed the threshold, registration becomes compulsory, even if you expect future income to fall below it.

Temporary spikes in income

If you temporarily go over the VAT threshold but can show HMRC that your turnover will drop below £90,000 again within the next 12 months, you can apply for an exception from registration.

You must write to HMRC explaining the situation and provide evidence (such as contracts or forecasts). If accepted, you won’t need to register, but if HMRC rejects your request, you must complete VAT registration as usual.

How to register for VAT

You can register for VAT online through the HMRC VAT portal. The process typically involves:

  1. Creating a Government Gateway account if you do not already have one.

  2. Completing the online registration form.

  3. Receiving your VAT registration number and certificate.

Once registered, you must:

  • Charge VAT on taxable sales.

  • Keep VAT records and invoices.

  • Submit VAT returns (usually every three months).

  • Pay any VAT owed to HMRC by the deadline.

Many self employed people use accounting software such as Xero, QuickBooks, or FreeAgent to handle VAT submissions automatically in line with Making Tax Digital (MTD) requirements.

VAT rates explained

There are three main VAT rates in the UK:

  • Standard rate (20%) applies to most goods and services.

  • Reduced rate (5%) applies to some products such as energy-saving materials.

  • Zero rate (0%) applies to items like most food and children’s clothing.

If you sell a mix of these, you must track which rate applies to each sale and charge VAT accordingly.

What happens after you register

Once VAT registered, you will:

  • Add VAT to your invoices at the correct rate.

  • Submit VAT returns (usually quarterly) to report sales, purchases, and VAT owed.

  • Reclaim VAT on eligible business expenses.

  • Keep all VAT-related records digitally for at least six years.

You may also choose a VAT accounting scheme to simplify administration. For example:

  • The Flat Rate Scheme simplifies calculations by paying a fixed percentage of turnover.

  • The Cash Accounting Scheme allows you to pay VAT only when customers pay you.

  • The Annual Accounting Scheme lets you file one VAT return per year with interim payments.

Your accountant can help you choose the most suitable option based on your cash flow and turnover.

Deregistering for VAT

If your turnover drops below £88,000, you can apply to deregister for VAT. This might be sensible if your sales have declined or you are closing your business.

When deregistering, you must:

  • File a final VAT return.

  • Pay any VAT due on stock or assets you still hold.

  • Keep records for at least six years.

HMRC will confirm when your VAT registration is cancelled.

How an accountant can help

Managing VAT as a self employed person can be time-consuming and complex. A qualified accountant can help you:

  • Monitor your turnover to know when to register.

  • Choose between voluntary and compulsory registration.

  • File VAT returns accurately and on time.

  • Reclaim VAT on purchases and capital assets.

  • Stay compliant with Making Tax Digital rules.

Professional guidance ensures you pay the right amount of tax without missing opportunities to save money.

The bottom line

If you are self employed, you only need to register for VAT once your taxable turnover exceeds £90,000 in a rolling 12-month period. However, voluntary registration may still be beneficial depending on your clients and expenses.

Monitoring your income carefully and understanding how VAT applies to your business ensures you stay compliant and make informed financial decisions.

By seeking professional advice and maintaining accurate records, you can manage VAT efficiently, avoid penalties, and focus on growing your self employed business with confidence.