Let’s start with the basics - what IS the VAT threshold?

If you’re not sure what the current threshold is, you’re not alone! As of April 2024, the VAT registration threshold is £90,000 of taxable turnover in any 12‑month period. And it’s calculated on a rolling 12 months, not your year‑end accounts. If you hit it, HMRC expects you to register within 30 days. Seeing that number means your business is growing (hooray) but it also means lots of new admin (boo). No one throws you a party for reaching the VAT line, they just send you more forms.

What happens when you go over the VAT registration

threshold?

The 30‑day clock starts ticking:

Miss the deadline and HMRC can issue a ‘failure‑to‑notify penalty’ of up to 30% of the VAT due. Ouch. Make sure you register online within the time limit or ask your accountant to do it for you..

You have to start charging VAT and file returns:

These are usually quarterly; miss them and late‑submission penalties kick in. From your “effective date of registration” (usually the first day of the second month after you went over), you have to add 20% VAT to standard‑rated sales and submit returns, normally every quarter.

Digital records become compulsory:

Under HMRC’s Making Tax Digital (MTD) initiative, every VAT‑registered business has to keep digital records and file returns using “compatible software”. That means your shoebox or Tesco bag of receipts and invoices is officially redundant and you need to start using tools like Xero, QuickBooks or Sage. (We like Xero because it plays nicely with HMRC.)

VAT‑exempt vs zero‑rated vs standard‑rated - what’s the difference?

Think of VAT as three completely different jackets hanging on the same coat hanger. They all live in HMRC’s wardrobe, but each one fits (and costs) differently:

VAT‑exempt: the “you’re not invited” jacket 

Certain goods and services sit outside the VAT party altogether. Typical examples include healthcare services, postage stamps and some training courses. Because they’re exempt, you don’t charge your customer any VAT and you also lose the right to reclaim the VAT on your own related costs. 

In practice that means the price you quote is the price they pay, but your margins might suffer if you’ve paid VAT on supplies you can’t reclaim.

Zero‑rated: the “you can come in, but we won’t charge you on the door” jacket

Items such as most printed books, children’s clothing and basic foods are classed as zero‑rated. You still put them on a VAT return, but you charge 0%. The crucial bonus is that you can reclaim input VAT on your own expenses. To your customer, it feels like VAT‑free shopping but to HMRC it’s still a taxable sale that has to be reported.

Standard‑rated (20%): the “full ticket price” jacket

Everything that isn’t exempt or zero‑rated slides into the standard‑rated bucket – currently 20%. You add the VAT to your invoice, collect it from the customer, then pass it to HMRC via your quarterly return. You can also reclaim any VAT you paid on related costs. It’s the default setting for most goods and services in the UK.

Mix a few of these categories together and the maths gets a bit… well… spicy. Let’s imagine you have one product line at 0%, another at 20 %, a third that’s exempt – suddenly your bookkeeping resembles a game of Twister. But this is where your accountant should earn their keep — mapping each sale to the right category so you don’t overcharge customers or short‑change yourself.

How an accountant helps you keep VAT manageable

A good accountant is part translator and part safety net, turning HMRC‑speak into plain English while catching problems before they cost you money.

They can help walk you through VAT registration and set‑up. The online forms get filed, your bookkeeping software is connected to HMRC, and you can breathe again knowing the clock has stopped ticking.

Next comes choosing the right scheme. Whether you land on the flat‑rate scheme, cash‑accounting, or the standard method, your accountant will explain how each option affects cash flow and admin, then recommend the one that best suits your turnover and industry.

They’ll also handle the VAT makeover your paperwork needs: updating invoice templates, price lists, and management reports so every sale shows the correct rate and every return adds up.

Finally, expect quarterly returns and gentle nudges. Your accountant will draft and file the return, remind you of payment deadlines, and flag any issues long before HMRC does—so you can get a full night’s sleep instead of a last‑minute panic.

4 ways to help make sure you stay compliant

VAT registration can feel like a big jump — but it doesn’t have to be messy. With the right support, it’s just another step forward in growing your business.

1. Track your turnover monthly: a quick spreadsheet check today beats a panic in December.

2. Talk to your accountant early: they can sanity-check your numbers before HMRC sees them saving you time and stress.

3. Be prepared

   • Work out if your sales are exempt, zero‑rated or standard‑rated 

   • Revisit your prices: whacking on 20% overnight could spook your customers.

   • Draft a friendly email to your customers explaining the change (no one likes surprise VAT).

4. Register promptly: either do it yourself online or ask your accountant to sort if for you.

Quick recap…

• Watch your rolling turnover. Surprises are for birthdays, not VAT

• Know which of your sales are exempt, zero‑rated or standard

• Get advice early; firefighting costs more than planning

• Ask your accountant questions – most of us love translating HMRC into human-speak.

Hopefully I’ve answered some of the questions you have about VAT. But if you’re still worried about going over the threshold or which accounting software to choose, drop me a message here on LinkedIn.

There’s no such thing as a silly VAT question and, if it’s keeping you awake, let’s untangle it!

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