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Why you need to register for VAT
28 April 2022

Our recent blog was whether you should become a limited company or stay as a sole trader. On the back of this we thought you may find this blog useful on why you need to register for VAT and the implications of being late or waiting years to submit your first VAT return.

When must I register for VAT?

While there are pros and cons to registering for VAT before you hit the mandatory registration threshold, once your business sales exceed the threshold you no longer have a choice. The 2022/2023 VAT registration threshold is £85,000 for a rolling 12-month period. If your business’ taxable turnover exceeds this amount or is going to in the next 30 days, you must register. The date of registration should be the date you realise your business will exceed the threshold, not when it hits that point.

Once your business is VAT registered, you’ll be required to complete and pay a quarterly VAT return, you can choose to submit monthly if you prefer.  As such, you’ll want to ensure your accounting software is set up correctly to charge VAT on to the customer and correctly record VAT you can reclaim on purchases.  We are Gold Xero Accounting Software partners, which means all of our clients are already using cloud-based software and we’d highly recommend Xero to any business.

The consequences if you don’t register for VAT

If you have left things too late and your business is over the VAT registration threshold, it is important to act quickly to reduce any penalties you may incur. Delaying important paperwork is only going to add to your stress and your to-do list and in the case of VAT, if you don’t register when required, there can be serious financial consequences. The size of the penalty will depend on how late you were when you registered for VAT. If you should have registered already, registering as soon as possible could still limit the penalties applied to your account.

In addition to penalties, you’ll be required to include VAT on all sales back to the date the business should have registered. You must keep copies of all VAT invoices and receipts for at least six years.

How late you were when you registeredThe penalty
9 months or under5% of what you owe, on top of what you should have been paid.
Between 9 and 18 months late10% of what you owe, on top of what you should have been paid
Over 18 months late15% of what you owe, on top of what should have been paid


How can you prevent late VAT returns?

The truth is the taxman won’t tolerate late VAT payments and the more deadlines you miss, the bigger the surcharge you’ll have to pay. It is crucial to be prepared for VAT returns right from the very beginning. We highly recommend setting up email reminders via the HMRC online portal which will remind you before a deadline.


As of April 2022, the government introduced ‘Making Tax Digital’ for all VAT registered businesses. That requires all VAT businesses submit via online software. This means when it is time to file with HMRC, you can do so directly from the app making it easier to submit your taxes. Not only is this more efficient but it significantly decreases the chances of errors. After all we are only human.

How can we help?

Close and regular monitoring of your financials can go a long way in saving your business time and money. Registering for VAT at the right point will help you avoid potential financial penalties. It also means you’re taking your business and its growth seriously.

At YST we are all about making your life easier and taking the stress away. Whether you’re after some advice or want us to complete the entire VAT process for you including preparing your VAT returns moving forward, this is something we would be happy to help with.