First things first, what is VAT?
Value Added Tax – aka VAT – is the 20% tax that consumers pay to businesses when they purchase their products and services. While your business may collect VAT, it never belongs to you; it is paid to His Majesty’s Revenue and Customs (HMRC).
The legality of when – or if – to register for VAT is actually quite straightforward. Businesses are only required to charge VAT, register to pay VAT, and pay it usually quarterly to the HMRC when their gross annual revenue reaches a certain threshold. As of the 2023/2024 tax year, that VAT threshold stands at £85,000.
However, when it comes to VAT registration, there are other considerations, too. Some small business owners voluntarily register for VAT even before their annual revenue hits the compulsory £85,000 threshold.
Why might this strategy be worthy of consideration? Here are some of the potential benefits to consider:
If considering the strategy of registering for VAT voluntarily you may want to weigh it up against the “cons” of VAT registration:
So, there you have it! Whether you’re deciding if to register for VAT, are looking to register, or are already registered and are looking to file your annual VAT return, 121 Company Formation can help!
About 121 Company Formation121 Company Formation is one of the UK’s leading online company formation agents. We have helped over 50,000 entrepreneurs register a company in the UK. We offer the most comprehensive range of services including company formation packages that start at just £15.95, administrative, accounting, and bookkeeping services to support you and your business before, during, and after the incorporation process.