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VATUpdated 2026-10-19

Can I voluntarily register for VAT?

Quick Answer

Yes, you can register for VAT voluntarily even if your turnover is below the £90,000 threshold. This can be beneficial if you sell to VAT-registered businesses or make significant purchases with VAT.

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Detailed Explanation

Voluntary VAT registration

You can register for VAT at any time, regardless of your turnover. There's no minimum turnover requirement.

When voluntary registration makes sense

  • **Your customers are VAT-registered businesses (B2B)**
  • - They can reclaim the VAT you charge, so it doesn't increase their costs
  • - Your business appears more established and professional
  • - No competitive disadvantage
  • **You make significant zero-rated sales**
  • - Zero-rated goods (e.g., food, children's clothing, books) mean you charge 0% VAT on sales
  • - But you can still reclaim VAT on your purchases
  • - This creates a **VAT refund** from HMRC each quarter
  • **You have significant start-up costs**
  • - Reclaim VAT on equipment, stock, and setup costs
  • - Can backdate claims up to 4 years for goods and 6 months for services
  • **You export goods or services**
  • - Exports are zero-rated
  • - Reclaim UK VAT on your business costs

When voluntary registration is a bad idea

  • **Your customers are consumers (B2C)**
  • - They can't reclaim VAT
  • - You'd need to add 20% to your prices or absorb the cost
  • - Could make you uncompetitive against non-VAT-registered competitors
  • **Your expenses have little VAT**
  • - Service businesses with mainly staff costs won't reclaim much
  • - The admin burden may outweigh the benefit
  • **You can't handle the admin**
  • - Quarterly VAT returns are mandatory
  • - MTD-compatible software is required
  • - Records must be kept meticulously
  • - Errors lead to penalties

The Flat Rate Scheme option

If you register voluntarily, consider the Flat Rate Scheme

- Pay a fixed percentage of gross turnover (varies by sector, e.g., 14.5% for IT consultancy) - Keep the difference between what you charge (20%) and what you pay - Simpler accounting - First-year 1% discount - But check the **limited cost trader** rule (16.5% flat rate if goods cost less than 2% of turnover)

How to register voluntarily

  • Apply online via your Government Gateway account
  • HMRC usually processes within 30 working days
  • You can request a specific start date (up to 4 years back for goods)
  • You'll receive your VAT registration certificate and number

Can I deregister later?

Yes. If your taxable turnover drops below £88,000 (the deregistration threshold), you can apply to deregister. You can also deregister if you stop trading. There's no minimum registration period.

Important

Once registered, you must charge VAT on all taxable supplies and file returns on time, even if your turnover drops. Failure to do so results in penalties.

Source: HMRC Voluntary VAT Registration Guidance

Real-World Examples

Start-up with High Initial Costs

You're starting a new manufacturing business with significant upfront investment in machinery subject to VAT. Voluntarily registering allows you to reclaim the VAT on these purchases immediately, improving your cash flow in the crucial initial months.

Supplying VAT-Registered Clients

As a freelance graphic designer, your clients are primarily VAT-registered marketing agencies. Registering for VAT voluntarily ensures they can reclaim the VAT you charge, making your services more attractive compared to non-VAT registered designers.

Preparing for Rapid Growth

Your online retail business is experiencing strong growth and you anticipate exceeding the VAT threshold within the next 6-12 months. Registering voluntarily now allows you to streamline your processes and avoid the rush when you become legally obligated.

Common Mistakes to Avoid

  • Failing to consider the administrative burden of VAT reporting before voluntarily registering.
  • Assuming that registering for VAT will automatically increase sales without a proper marketing strategy.
  • Neglecting to calculate the impact of VAT on your pricing and profit margins before registration.
  • Not understanding the difference between standard rated, reduced rated and zero rated sales and how it affects your VAT liability.

If I voluntarily register and then my turnover drops below the deregistration threshold, can I deregister?

Yes, you can apply to deregister if your turnover falls below the deregistration threshold, which is currently £88,000 (for the 2026/27 tax year). You must apply within a specific timeframe and meet certain conditions.

How long does it take to voluntarily register for VAT?

HMRC typically processes online VAT registration applications within 30 working days. However, processing times can vary, so it's best to apply well in advance of when you need to be VAT registered.

What information do I need to voluntarily register for VAT?

You'll need your company registration number, business address, bank account details, estimated turnover, and details of your business activities (SIC code). You'll also need to choose a VAT scheme, such as standard accounting or cash accounting.

What are the penalties for late or incorrect VAT returns?

Penalties for late filing or payment of VAT can include fixed penalties, interest charges, and, in serious cases, criminal prosecution. Penalties are calculated based on the amount of VAT outstanding and the length of the delay.

Practical Tips

  • Use accounting software that is 'Making Tax Digital' (MTD) compliant to streamline your VAT reporting process and reduce the risk of errors; popular choices include Xero, QuickBooks, and FreeAgent.
  • Conduct a thorough VAT impact assessment before registering to understand how it will affect your pricing, costs, and profitability; this should include modelling different sales scenarios.
  • Consider using the Cash Accounting Scheme if your turnover is below £1.35 million (for 2026/27), as this allows you to account for VAT only when you receive payment from your customers.
  • Implement a clear VAT invoicing system to ensure you're charging and recording VAT correctly on all transactions; this includes displaying your VAT registration number clearly on all invoices.

Related Questions

What is the VAT threshold in 2026?

The VAT threshold in 2026 is £90,000, unchanged since April 2024. If your taxable turnover exceeds this amount in any rolling 12-month period, you must register for VAT.

What is the Flat Rate VAT Scheme?

The Flat Rate VAT Scheme lets you pay a fixed percentage of your turnover as VAT instead of calculating VAT on every sale and purchase. It simplifies VAT accounting for small businesses.

When do I need to register for VAT?

You must register for VAT when your taxable turnover exceeds £90,000 in any 12-month period, or if you expect to exceed it in the next 30 days.

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