The UK’s tax authority, HM Revenue and Customs (HMRC) has introduced a new digital tool to help businesses estimate the implications of registering for Value Added Tax (VAT).
The VAT Registration Estimator was developed in response to feedback from small businesses, who said an online tool would be helpful in determining when their turnover may require VAT registration and the effect this could have on their profits.
Requirements for VAT Registration
Businesses are required to register for VAT if:
- Their total VAT-taxable turnover for the previous 12 months exceeds £90,000 (the ‘VAT threshold’, increased from £85,000 on 1 April 2024).
- They expect their turnover to go over the £90,000 threshold in the next 30 days.
- They are an overseas business not based in the UK, supplying goods or services to the UK (or expecting to do so in the next 30 days), regardless of VAT-taxable turnover.
VAT-registered businesses must charge VAT on eligible sales and can typically reclaim VAT paid on eligible business purchases. There are around 300,000 new VAT registrations each year.
The new estimator tool allows businesses to input their income, costs, and VAT rates to see how VAT registration could impact their finances. It also provides links to further guidance on the VAT registration process. The tool can be useful for businesses operating below the threshold who are considering voluntary VAT registration.
Getting Started with the VAT Registration Estimator
Before using the tool, you’ll need to gather some information about your business:
- Review the information online about what the VAT Registration Estimator does, and use the provided links to access additional guidance.
- Determine whether your business is, or will be, based in the UK.
- Gather details on your approximate business income and costs for the time period you want to estimate, up to 12 months. This can also be used if you’re setting up a new business.
- Use the guidance links to choose the appropriate VAT rates for your business income and costs – this includes estimating the percentages that are zero-rated, reduced-rated, standard-rated, or VAT-exempt.
- Decide whether you would prefer to add VAT to, or absorb VAT into, your current or estimated selling prices.
- Carefully review your answers, then complete the form to see the results. You can save and print the output for future reference.
The VAT Registration Estimator is available on GOV.UK and should take around 20 minutes to complete. HMRC will not record the details entered by users. However, the tool is for guidance only and should not be used to complete actual VAT returns.
Click here to access the VAT Registration Estimator.
Further Information
If you would like more information on the new VAT Tool, please contact your usual NRB advisor.
Click here to find out more about the services we offer here at NRB.
