VAT reality

£90,000

Mandatory registration threshold (trailing 12 months)

⚠️ Not Tax or Accounting Advice

This guide is for informational purposes only and does not constitute tax advice, accounting advice, or professional financial services. Tax laws, allowances, and HMRC requirements change frequently.

Before making any tax decisions or filing returns: Consult a qualified accountant or tax advisor who can review your specific circumstances. What's mentioned here may not apply to your situation, and regulations may have changed since publication.

Official source: HMRC (gov.uk/hmrc)

Registering too early costs an average £3,400/year in admin fees and price increases. Registering too late triggers £5,000+ penalties. Here’s the exact timing strategy.

Should You Register Voluntarily?

Below £90k turnover, registration is optional. Only register voluntarily when the math works in your favour.

Situation	Why it works	Typical savings
B2B (all clients VAT-registered)	Price increase doesn’t matter; reclaim £2k–£4k input VAT	£2k–£4k/year
High material costs	Reclaim 20% VAT on £20k+ materials	£3k–£6k/year
Approaching £90k threshold	Register at £70k to avoid rushed systems	Peace of mind
Commercial contracts requiring VAT	Some tenders demand VAT registration	Access to £50k–£200k contracts

When voluntary registration backfires:

B2C domestic work (customers can’t reclaim VAT → you look 20% more expensive)
Service-only businesses with little input VAT to reclaim
Turnover below £70k with no immediate plan to hit £90k
Fragile cash flow (VAT is due quarterly even if customers pay late)

Flat Rate Scheme vs Standard VAT

Once registered, you choose a scheme. Standard VAT reclaims input VAT but requires detailed bookkeeping. The Flat Rate Scheme lets you keep the spread between 20% charged and ~12% paid.

Standard VAT example (quarter): Sales £30k + £6k VAT, expenses £8k + £1.6k VAT → pay HMRC £4.4k.

Flat Rate example (plumber, 9.5%): Gross invoices £36k (inc VAT). Pay HMRC £3.42k (9.5% of £36k). Keep ~£980 extra.

Trade	Flat rate %	First-year rate
Plumbing/heating	9.5%	8.5% (year 1)
Electrical services	12.5%	11.5%
Building & construction	9.5%	8.5%
Carpentry/joinery	12.5%	11.5%
Cleaning services	12%	11%
Gardening/grounds maintenance	11%	10%
General labourers	8.5%	7.5%

When to Register

Monitor your trailing 12-month turnover monthly. When you hit £85k, set up VAT accounting. At £90k, register within 30 days.

Making Tax Digital Checklist

Choose MTD-compatible software (Xero, QuickBooks, Toolfy integrations)
Keep digital records of sales/invoices
File quarterly VAT returns via the software
Store digital copies for six years

Penalties & Deadlines

Register within 30 days of exceeding £90k. Late registration triggers VAT owed from the date you should have registered plus penalties up to 15%.

Bottom Line

Stay unregistered until profit and customer mix justify VAT. When you cross £50k profit with mostly VAT-registered clients, plan to register voluntarily at £70k turnover so the transition is clean.

Should You Register Voluntarily?

Below £90k turnover, registration is optional. Only register voluntarily when the math works in your favour.

Situation	Why it works	Typical savings
B2B (all clients VAT-registered)	Price increase doesn’t matter; reclaim £2k–£4k input VAT	£2k–£4k/year
High material costs	Reclaim 20% VAT on £20k+ materials	£3k–£6k/year
Approaching £90k threshold	Register at £70k to avoid rushed systems	Peace of mind
Commercial contracts requiring VAT	Some tenders demand VAT registration	Access to £50k–£200k contracts

When voluntary registration backfires:

B2C domestic work (customers can’t reclaim VAT → you look 20% more expensive)
Service-only businesses with little input VAT to reclaim
Turnover below £70k with no immediate plan to hit £90k
Fragile cash flow (VAT is due quarterly even if customers pay late)

Flat Rate Scheme vs Standard VAT

Once registered, you choose a scheme. Standard VAT reclaims input VAT but requires detailed bookkeeping. The Flat Rate Scheme lets you keep the spread between 20% charged and ~12% paid.

Standard VAT example (quarter): Sales £30k + £6k VAT, expenses £8k + £1.6k VAT → pay HMRC £4.4k.

Flat Rate example (plumber, 9.5%): Gross invoices £36k (inc VAT). Pay HMRC £3.42k (9.5% of £36k). Keep ~£980 extra.

Trade	Flat rate %	First-year rate
Plumbing/heating	9.5%	8.5% (year 1)
Electrical services	12.5%	11.5%
Building & construction	9.5%	8.5%
Carpentry/joinery	12.5%	11.5%
Cleaning services	12%	11%
Gardening/grounds maintenance	11%	10%
General labourers	8.5%	7.5%

VAT Registration Guide for Trade Businesses 2026

Should You Register Voluntarily?

Flat Rate Scheme vs Standard VAT

When to Register

Making Tax Digital Checklist

Penalties & Deadlines

Bottom Line

Build a pricing command center in Toolfy

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VAT Registration Guide for Trade Businesses 2026

Should You Register Voluntarily?

Flat Rate Scheme vs Standard VAT

When to Register

Making Tax Digital Checklist

Penalties & Deadlines

Bottom Line

Build a pricing command center in Toolfy

Related Articles

UK Trades Tax Deduction Checklist 2026

Small Business Accounting for Service Companies 2026

Service Business Pricing Mastery 2026: Complete Guide to Profitable Pricing