Is your business is getting close to the VAT threshold in the UK (currently £90,000 during a 12 month rolling period)?
If it is – HUGE well done! You’ve braved setting up a business, and have made a mammoth amount of sales. You might not feel like it is, but it’s seriously impressive and you should be proud of yourself
Hitting that level of turnover means things are moving in the right direction, but you’re at a point where you need to start looking at your business properly and start making some serious decisions.
If you’re not sure what sort of things you should be considering, i’ve listed some below (i’ve got your back ;-))
- Do I want to purposely stay below the VAT threshold? If you’re planning to stay below the VAT threshold, then you need to consider that your income may be limited as your only option to increase your profit will be to reduce your costs.
- Am I happy being VAT registered as a sole-trader? Personally, I don’t like sole-traders being VAT registered and prefer that they incorporate before registration
- How would being VAT registered impact my clients? If most of your clients are other VAT registered businesses, then it’s just a cash flow impact, but if they’re not VAT registered then either you’ll need to give them a 20% ‘price increase’, or you absorb the VAT yourself
- Should I set up and start trading through a Ltd company before I exceed the VAT threshold as a sole-trader, to enable me to effectively start the rolling turnover again? (this only works if you incorporate and start trading via a Ltd company before you exceed the VAT threshold as a turnover. If you’ve already exceeded the VAT threshold as a sole-trader then your Ltd company would need to be VAT registered from day one).
I know VAT registration can feel like a headache, especially if you’re busy running a small business and don’t have time for jargon, red tape and boring meetings with a stuffy accountant who doesn’t even know how to copy and paste. As an online accounting specialist supporting UK businesses (sorry had to sneak in my SEO key words there!), I’m here to keep things clear and simple.
How I Help:
- If you’re not VAT registered and are keen to stay below the threshold, i’ll keep an eye on your turnover and give you a heads up when you’re getting suspiciously close
- If you’ve exceeded the threshold then i’ll sort the registration and the quarterly VAT returns, as well as keep you on track so you don’t forget to pay HMRC on time
What is the VAT Threshold?
It’s simple: If your rolling 12-month sales (not just your financial year) hit £90,000, you have to register for VAT. Ignore it, and HMRC will come calling. But don’t panic—this is all manageable with the right bookkeeping support.
What Counts Towards Your VAT Turnover?
This is where people get tripped up. Your VAT turnover includes:
- All your UK sales (unless they’re VAT exempt)
- Goods you hire or loan to customers
- Items you use for the business but also for yourself
- Gifts, barters, and zero-rated goods
It doesn’t include things like:
- Wages, salaries, or dividends
- Genuine gifts of money
- Sales of goods that are outside the UK at the time of sale
- Services carried out entirely outside the UK
- Anything that’s not business activity
If you’re not sure, just ask—I’m always happy to clarify as your cloud-based accountant.
What if You Sell Goods or Services Outside the UK?
Exports (selling goods to customers outside the UK) are usually zero-rated for VAT. That means you don’t charge VAT, but those sales still count towards your VAT turnover. Services are a bit more complicated, and it depends where your customer is and what you’re selling. If you’re regularly selling overseas—especially through platforms like Shopify, Etsy, or Wix—it’s worth getting advice that fits your exact situation. As a specialist in ecommerce accounting, I can help you navigate VAT for online businesses.
What Changes Once You’re VAT Registered?
- You’ll charge VAT on your sales
- You’ll submit VAT returns (usually every quarter)
- You’ll need to keep digital records (using tools like Xero or Apron/Dext)
It sounds like a lot, but with the right cloud-based bookkeeping setup, it’s not as scary as it sounds.
Final Thoughts:
VAT registration is a sign your business is growing, not something to dread. If you want to chat things through, or just need a bit of reassurance, book a call with Karaccounts. No jargon, no judgement—just support from a team that specialises in accounting for small businesses and ecommerce entrepreneurs.