The UK VAT registration threshold is currently at £85,000 and is set to increase to £90,000 from 1st April 2024.   This means that businesses with an annual turnover of £90,000 or more must register for VAT.  Further to the increase to the VAT registration threshold, the VAT deregistration threshold will also increase from £83,000 to £88,000. 

The increase is welcomed by entrepreneurs, start-ups, and small businesses due to many positives such as improving cash flow, reducing immediate tax burdens, and removing potential barriers to growth. 

VAT Registration and Returns 

VAT, an abbreviation of Value Added Tax, is a type of indirect tax. VAT is levied on many Goods and Services in the UK. When a UK business reaches a specific annual taxable turnover, it must register for VAT.  

To remain compliant, you need to register within 30 days of the end of the month when you went over the threshold.  Once registered for VAT, it is the Business's (or Trader’s) responsibility to collect Sales VAT; as a direct result of registering for VAT, the business can reclaim VAT on purchases. Sales VAT and Purchase VAT will need to be reported to HMRC (Her Majesty's Revenue and Customs) by the specified deadline outlined at registration. 

Registering for VAT can be a complex and time-consuming headache for any business. Meticulous record-keeping would need to occur, quarterly VAT returns need to be submitted (can be monthly or annually depending on the VAT scheme), and potential VAT audits. This administrative burden can be a major obstruction for businesses with limited resources.  

What are the Potential Benefits of the Increased Threshold? 

The higher threshold offers several advantages, which include but not limited to: 

• Improving cash flow – removes the requirement for businesses to collect and pay VAT on sales if they were close to the previous threshold. 

• Pricing – those Businesses who were close to the previous registration threshold may no longer need to factor in VAT to their pricing. 

• Growth - removing the VAT registration barrier, the government hopes to encourage more entrepreneurship and stimulate economic growth. 

Why the Increase? 

There were several factors which led to the government's decision, which includes: 

• Supporting Small Businesses – the challenges faced by small businesses were considered and the government aimed to ease their administrative burden. 

• Accounting for Inflation – the previous threshold of £85,000 was in place for several years. The increase adjusts for inflation, ensuring more businesses remain exempt from VAT registration. 

How can we help? 

With the recent VAT threshold increase, many small businesses are now exempt from registration. However, navigating VAT intricacies can still be challenging, especially when considering voluntary registration or those who are close to the threshold.  

The team at Efficient Ops has managed the VAT function for many businesses, including VAT compliance, ensuring accurate and timely filings, and simplifying the VAT process. 

Why not contact Efficient Ops to see how we can help you with your VAT needs?