VAT
Understanding VAT for Your Business
Value Added Tax (VAT) is charged on many goods and services. Once registered, a business usually charges VAT on taxable sales, records VAT on purchases and reports the figures to HMRC.
This guide explains the main points. For help managing registration or returns, see our VAT Services page.
Rates and registration threshold checked: 16 October 2026.
When Must You Register?
For most UK-established businesses, compulsory registration applies when:
- VAT-taxable turnover for the previous rolling 12 months exceeds £90,000; or
- You expect VAT-taxable turnover to exceed £90,000 in the next 30 days alone.
The test concerns taxable turnover, not profit or just your accounting year. Zero-rated sales count towards taxable turnover; exempt sales generally do not. Other registration rules can apply, including to businesses established outside the UK.
You may choose to register voluntarily below the threshold. Consider the effect on pricing, customers and administration before deciding.
VAT Rates
- 20% standard rate: applies to most goods and services.
- 5% reduced rate: applies to certain supplies, such as domestic fuel and power.
- 0% zero rate: applies to qualifying supplies, including most food and children’s clothing.
Exempt supplies are different from zero-rated supplies. Check the treatment of what you sell rather than assuming the same rate applies to every transaction.
Reclaiming VAT
VAT on qualifying purchases used for taxable business activities may be recoverable, subject to the rules and supporting evidence. Private use, exempt activities and certain types of expenditure can restrict recovery. Keep suitable purchase invoices and records.
VAT Returns and Payments
Returns are usually quarterly. The usual online filing and payment deadline is one calendar month and seven days after the period ends, although some schemes have different arrangements. Check your own deadlines with HMRC. A return is still required if there is no VAT to pay or reclaim.
Making Tax Digital for VAT
VAT-registered businesses must keep specified VAT records digitally and submit their VAT returns using Making Tax Digital compatible software, unless they are exempt from Making Tax Digital for VAT.
Check Before a Significant Transaction
Property, overseas transactions and mixed taxable and exempt activities can involve additional rules. Seek advice before committing to a transaction where the VAT treatment is uncertain.
This is general information. The correct treatment depends on your circumstances and the rules in force at the time.
Need Help With VAT?
Our VAT Services page explains how Merranti can support your business.
- Registration advice
- Return preparation and submission
- Questions about VAT recovery
- Specialist property VAT advice
Tell us what you need and we can agree the scope and fee.
Explore VAT ServicesMonitor Turnover
Review taxable sales regularly. Do not wait for your year-end accounts to consider whether registration is due.
Keep Clear Records
Organise sales invoices, purchase invoices and adjustments so the figures behind each return can be explained.
Plan Your Cash Flow
Allow for VAT payments in your cash planning. VAT collected from customers may be payable to HMRC.
Official Guidance
VAT registration
VAT rates
VAT returns and deadlines
Making Tax Digital for VAT
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VAT information and support
Understand the rules. Get support when you need it.
If the information here raises a question about your business, speak to Merranti. We can discuss your circumstances and explain the VAT support available.
Let’s talk and see how we can help you.
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