As a UK business, you must register for paying VAT if your ‘VAT taxable turnover’ is more than £85,000. For many small businesses, that sounds like a large sum. In fact, if you’re in a sales-based business, as many are, it’s really not so large in practice.
In reality, that’s actually ‘only’ around £1635 per week in sales – quite conceivable, if not now, then as your business grows.
Therefore you need to get savvy where VAT is concerned. You need to know how to register, how to keep track of that important amount (the VAT taxable turnover), how you deal with VAT with customers, and how you work out how much to pay in VAT.
The VAT Taxable Turnover
The VAT taxable turnover is a phrase you need to wrap your head around not only if you are required to pay VAT, but in order to determine if you need to register. In short, it is the total value of everything you sell that isn’t exempt from VAT. This requires some maths and accurate record-keeping on your part.
You’ll need to add together the total value of all of your sales within the UK which are eligible, and then subtract the input VAT you’ve paid on goods yourselves. Bear in mind this doesn’t just cover straight forward sales. It also includes:
- Any items you hired out e.g. to customers
- Any business goods you’ve used for personal reasons
- Any goods you’ve given as gifts, or used in part exchange
- Any services you received from businesses in other countries that you had to ‘reverse charge’
- Any building work for the business in excess of £100k
In most instances you’re looking at the standard VAT rate of 20%. There are also the 5% and 0% VAT rates which apply to those who sell a few specific products such as children’s car seats, most food, books etc.
Registering for VAT can be done online here.
Reducing the Anxiety and Stress of VAT
We work with multiple small and medium-sized businesses, and VAT is quoted as one of the main causes for stress and anxiety. It can seem bewildering, and of course everyone wants to avoid a nasty unexpected bill. This is why it’s important to get your ducks in a row.
Most businesses which are required to pay VAT will be set up on the standard VAT system. Under this you pay a VAT bill quarterly. So you’ll need to keep your cash flow healthy and continually save for the VAT payments.
To do this you need to have impeccable bookkeeping. We understand the stress and anxiety that VAT can induce, and that’s why we’ve integrated some exceptional VAT features in to our bookkeeping software. It will run reports and even returns whether you use VAT cash accounting or the flat rate scheme.
You can literally calculate and file your VAT return directly from Pandle. How reassuring is that? This way you are always in control of your VAT, and can wave goodbye to those particular business concerns.