Do I Need to Register My Limited Company for VAT

If you run a limited company in the UK, you may need to register for Value Added Tax (VAT). VAT registration depends mainly on your company’s turnover and the type of goods or services you sell. While some companies must register by law, others choose to do so voluntarily to reclaim VAT on purchases or appear more established to clients. Understanding the rules helps you stay compliant and decide when registration makes sense for your business. This article explains when a limited company must register for VAT, how to register, and the pros and cons of doing it voluntarily.

When VAT Registration Is Compulsory

Your limited company must register for VAT if your taxable turnover exceeds the current registration threshold of £90,000 in any 12-month period.

Taxable turnover includes the total value of everything your company sells that is not VAT-exempt. This includes:

  • Standard-rated sales (charged at 20 percent).

  • Reduced-rated sales (charged at 5 percent).

  • Zero-rated sales (charged at 0 percent but still classed as taxable).

You must register if:

  • Your turnover in the last 12 months has exceeded the £90,000 threshold.

  • You expect your turnover to exceed the threshold within the next 30 days.

  • You take over another VAT-registered business that pushes your total taxable turnover above the limit.

The 12-month period is a rolling window, not a fixed tax year. This means you must check your turnover regularly and register as soon as you pass the limit.

When You Can Register Voluntarily

Even if your company’s turnover is below £90,000, you can register voluntarily. Many small businesses choose this option for several reasons:

  • To reclaim VAT on business expenses and purchases.

  • To appear more established when dealing with larger or VAT-registered clients.

  • To prepare for future growth and avoid rushing when turnover increases.

However, once registered, you must charge VAT on your sales, even if your customers are not VAT-registered. This can make your prices less competitive for consumers, so voluntary registration is best suited for companies that mainly serve other VAT-registered businesses.

How to Check If You Need to Register

To work out whether you must register, calculate your company’s taxable turnover over the last 12 months. Include:

  • Sales of goods or services subject to VAT.

  • Commission or agency fees.

  • Goods sold to EU countries (if applicable).

Do not include:

  • VAT-exempt income such as insurance, education, or some health services.

  • Income from outside the scope of UK VAT.

If your total taxable turnover reaches £90,000 or more, you must register with HMRC within 30 days of exceeding the threshold.

The Registration Process

You can register for VAT online through the HMRC website. To complete the registration, you will need:

  • Your company’s name, address, and contact details.

  • Your company registration number and Unique Taxpayer Reference (UTR).

  • Bank account details.

  • A description of your business activities.

  • Your estimated annual turnover.

Once registered, HMRC will send you a VAT registration certificate showing:

  • Your VAT registration number.

  • The effective date of registration.

  • When to submit your first VAT return.

You can then start charging VAT on your sales and reclaiming it on your business purchases.

What Happens After You Register

Once your company is VAT-registered, you must:

  • Charge VAT on taxable goods and services.

  • Issue VAT invoices showing your VAT number and the amount of VAT charged.

  • Submit VAT returns to HMRC, usually every quarter.

  • Pay VAT owed to HMRC or reclaim VAT on eligible purchases.

  • Keep digital VAT records using Making Tax Digital (MTD)-compatible software.

Even if you make no sales during a VAT period, you still need to submit a return unless you have cancelled your VAT registration.

Choosing a VAT Accounting Scheme

When you register, you can choose from several VAT accounting schemes depending on your business size and cash flow needs:

  • Standard VAT Accounting: You pay and reclaim VAT based on invoice dates.

  • Flat Rate Scheme: You pay a fixed percentage of your turnover instead of calculating VAT on every transaction (available if your turnover is below £150,000).

  • Cash Accounting Scheme: You pay VAT only when your customers pay you and reclaim VAT only when you pay your suppliers.

  • Annual Accounting Scheme: You make advance payments and submit one VAT return per year.

An accountant can help you decide which scheme best suits your business operations.

What If You Register Late

If your company fails to register on time, HMRC may charge penalties and interest. The penalty depends on how late the registration is and how much VAT you owe.

You may also have to pay VAT on sales made from the date you should have registered, even if you did not charge VAT to your customers at the time.

If you realise you have missed the registration deadline, it is best to register immediately and inform HMRC. An accountant can help you correct any previous invoices and minimise penalties.

When You Can Deregister for VAT

If your turnover falls below the deregistration threshold of £88,000, you can apply to cancel your VAT registration. You might also deregister if your company ceases trading or switches to VAT-exempt activities.

Once deregistered, you must stop charging VAT but still keep your VAT records for at least six years in case HMRC requests them.

Pros and Cons of VAT Registration for a Limited Company

Advantages:

  • You can reclaim VAT on business purchases and expenses.

  • Your business looks more credible to suppliers and clients.

  • You may benefit from certain VAT accounting schemes that improve cash flow.

Disadvantages:

  • You must charge VAT on your sales, increasing prices for non-VAT-registered customers.

  • There is additional paperwork and compliance, including quarterly VAT returns.

  • Mistakes can lead to penalties or audits.

Discussing your options with an accountant can help you decide whether VAT registration is right for your business at this stage.

How an Accountant Can Help

An accountant can guide you through the VAT registration process and ensure compliance with HMRC. They can:

  • Determine whether registration is mandatory or beneficial.

  • Register your company with HMRC on your behalf.

  • Advise on the best VAT accounting scheme.

  • Prepare and file VAT returns using MTD-approved software.

  • Ensure invoices, records, and reporting meet VAT requirements.

Having professional support helps you avoid errors and manage VAT efficiently, saving both time and money.

Summary

Your limited company must register for VAT once its taxable turnover exceeds £90,000 in any 12-month period, or you can register voluntarily to reclaim VAT and enhance your business image. Once registered, you must charge VAT on your sales, submit digital VAT returns, and maintain accurate records.

Whether registration is compulsory or voluntary, getting advice from an accountant ensures you comply with HMRC rules and make the best financial decision for your company.