In the United Kingdom, VAT (or Value Added Tax) must be paid on most goods and services. However, there are some situations where you do not have to register for VAT or pay any VAT at all. One such example is if your total sales are less than £81,000 in the previous 12 months. To learn more about when to register for VAT and when you can stay tax-free, read our guide on the topic!
VAT Registration for Small Businesses
A lot of small businesses avoid registering for Value Added Tax (VAT) because they think it will be a huge burden and take up too much of their time. In reality, however, VAT is one of those taxes that’s easy to pay but hard to collect—meaning you can benefit from your clients paying it without having to do any work on your end.
When do I need to register for VAT?
Some businesses are required by law to register for VAT (value added tax) while others may choose to do so. Understanding when you need to get a VAT number, and when it’s optional, is crucial. It all depends on what sort of business you’re running. If your business is subject to VAT, you’ll have to charge customers 20% tax on certain products or services and pay 20% tax on supplies you purchase. Give Ai & Co Chartered Certified accountants a call and we can help you understand if its time to register!
What are the advantages of registration?
For small business owners, there are usually no disadvantages. The main disadvantage is that some entrepreneurs prefer not to be bothered with additional accounting and administrative tasks. For these people, registration isn’t a good idea. However, if your company makes at least €75,000 per year in revenue or sells at least €225,000 worth of goods every 12 months, it’s probably a good idea. The standard fee is 2% of annual revenue or 2% of annual sales.
Are there any disadvantages of registration?
Yes. Although having a VAT number can be beneficial, there are also some disadvantages. Understanding these before you decide whether to go ahead with registration is crucial. Give us a call for more information.