Can I Register for VAT Before Reaching the Threshold?

Current VAT rules require that a business to become VAT registered once it hits £90,000 a year in VAT taxable turnover. But, can a business register before that?

The short answer to this question is yes. Businesses can register for VAT even if they haven’t yet reached the £90,000 registration threshold. Whether or not this is the right decision for a business though? Well, that depends.

The benefits of registering for VAT below the threshold

Voluntarily registering for VAT is a big decision that will have lasting implications, but it can have its benefits.

VAT input versus VAT output

Input tax is the VAT that a business pays on any purchases. Some businesses make a lot of purchases which are eligible for VAT, such as for materials, and so incur a lot of input tax. If the business is VAT registered, it charges VAT on top of taxable goods. This is known as output tax.

If the amount of input tax that a business has paid is more than the output tax charged, the business can reclaim the difference from HMRC.

Growing the business, and making an impression

Becoming VAT registered early helps a business prepare for future growth, whilst giving the impression of a much larger operation. For some customers, this is a reassuring sign, which might give them more confidence.


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What are the cons of voluntary VAT registration?

While there are some clear benefits to registering before hitting the threshold, there are some downsides too.

Record keeping for VAT

There’s plenty of record-keeping required for any business, and VAT registration will just add another dimension of it. Once VAT registered, the business will need to complete and submit regular VAT returns to HMRC. Since the introduction of Making Tax Digital (MTD) for VAT, this might mean a rethink on how to manage the business’s bookkeeping.


VAT and cash flow

While a businesses may benefit from early registration by reclaiming VAT, this might still cause cash flow issues. Sales might vary throughout the year, or a global pandemic might cause absolute chaos, making it hard to predict what the VAT bill will look like at the end of the year.

Cashflow might also be affected by the impact a price increase has on sales. This might lead to some difficult decisions to be made.

  • Keeping the price to the customer the same, but it now includes VAT, and so reduces the profit margin.
  • Add the VAT on to the price, and risk losing some customers.

Voluntarily registering for VAT is a big decision, so thorough research is essential. Learn more about how Pandle cloud bookkeeping software can help make the paperwork side of VAT less painful.

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.

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