The simple answer to this is no; you don’t need to be a limited company to be able to register for VAT. The more comprehensive response is that HMRC doesn’t differentiate between limited companies and sole traders when it comes to VAT registration.

Instead, HMRC uses a rolling turnover threshold as the marker for when any business needs to start paying VAT. Rolling turnover just means that it takes into account the turnover within a rolling 12-month period, rather than a fixed time period such as a financial or calendar year.

Value Added Tax (VAT), like the name suggests, is a tax added to the sale of most goods and services in the UK, though there are some exemptions. It’s not an exhaustive list, and HMRC go into more detail on their website, but VAT-exempt items might include:

• Education and training
• Any funds raised by charities
• Subscription to organisation membership programmes
• Insurance, finance and credit

Our video guide to VAT explains things in a bit more detail below.
 

The threshold for VAT registration is £90,000 from 1st April 2024 (and £85,000 until that point). So, if a business starts making a VAT-taxable turnover at or above the threshold within any 12-month period, then they will need to register to pay VAT. It’s worth noting that HMRC defines VAT-taxable turnover as: “The total value of everything you sell that is not exempt from VAT.”

If you think that your taxable turnover could reach the threshold within a rolling 30-day period, then you must register for VAT immediately.
 

If your rolling turnover is less than £90,000 then you aren’t required to register for VAT. However, there are some businesses which opt for voluntary VAT registration for a number of reasons including:

• Appearing more professional to customers, partners and investors
• Potential cash flow benefits when it comes to reclaiming VAT on expenses

Check your VAT-taxable turnover regularly to ensure that you don’t pass the £90,000 mark without realising!

If you think you need to register your business for VAT but aren’t sure about exemptions or which VAT scheme is best for you, get in touch with our online accountants and bookkeepers. Call us on 020 3355 4047 or get an instant online quote.