VAT Threshold Calculator

The VAT registration threshold is £90,000 (from April 2024). You must register if your taxable turnover in any rolling 12-month period exceeds this, or if you expect it to exceed £90,000 in the next 30 days alone.

The flat rate scheme (FRS) simplifies VAT by letting you pay a fixed percentage of your gross (VAT-inclusive) turnover instead of accounting for VAT on every purchase. Construction work falls under two HMRC categories (VAT Notice 733): "General building or construction services" at 9.5% when the materials you supply are 10% or more of your turnover, and "Labour-only building or construction services" at 14.5% when materials are under 10%. So a labour-heavy electrician, plumber, painter or joiner is usually Labour-only at 14.5%, not 9.5%. New businesses get a 1 percentage-point discount in their first year of VAT registration.

If your spend on goods (not services, and excluding capital assets, food/drink and vehicle costs) is less than 2% of your VAT-inclusive turnover — or more than 2% but under £1,000 a year — HMRC classes you as a "limited cost business" and you must use the flat rate of 16.5%, whatever your trade (VAT Notice 733). This catches most labour-only tradespeople with little material spend. At 16.5% of gross turnover (roughly 19.8% of your net sales) the flat rate scheme rarely saves money for them, so check the figures carefully before joining.

You must register within 30 days of the end of the month where your rolling 12-month turnover exceeds £90,000. Your effective date of registration is the first day of the second month after crossing the threshold.

Yes. Voluntary registration lets you reclaim VAT on purchases and can make your business appear more established. However, it means charging customers 20% more (which may matter if your customers are not VAT-registered) and adds quarterly VAT return admin.

You can deregister if your taxable turnover falls below £88,000 (the deregistration threshold). You must account for VAT on any stock and assets you hold at deregistration, and you can't reclaim VAT on purchases after that date.