The VAT (Value Added Tax) is the British equivalent of IVA. Not all businesses have to register for VAT — registration is only mandatory above a certain turnover threshold, although you can register voluntarily beforehand.
When is registration mandatory?
VAT registration is mandatory when your business’s taxable turnover exceeds the threshold of £90,000 in a 12-month period (or if you expect to exceed it in the next 30 days). Below that threshold, registration is optional.
Why register voluntarily?
- You can recover the VAT you pay on your business purchases and expenses
- It gives a more established image to corporate clients
- If your clients are VAT-registered businesses, they can deduct the VAT you charge them
Why not register if it’s not mandatory?
- If your clients are individuals, adding 20% VAT increases your final price
- It requires you to submit VAT returns periodically (usually quarterly)
- It adds administrative burden
The standard VAT rate
The standard VAT rate in the United Kingdom is 20%. Reduced rates (5%) and zero rate (0%) apply to certain goods and services.
How does Aiden help?
In the Taxes section you can see whether your business is registered for VAT and, if applicable, the submission dates. If you’re approaching the £90,000 threshold, it’s advisable to plan your registration with your accountant.