VAT assistance: VAT returns, registration and schemes for UK businesses
You must register for VAT if your taxable turnover goes over £90,000 in any rolling 12 months, or you expect it to pass £90,000 in the next 30 days alone. You then charge VAT (usually 20%) and file Making Tax Digital returns, normally quarterly, each due one month and 7 days after the period ends. As your VAT accountant, we register you, choose your scheme and file every return.
What does our VAT assistance cover?
From the first question about the threshold to every quarterly return after that, George handles your VAT with you directly, from Welwyn Garden City for small businesses across the UK. You get one point of contact who knows your business, and you'll know exactly what you're paying for.
Registering at the right time
We watch your turnover against both HMRC tests, register you before the deadline and tell you whether registering early would save you money.
Choosing a VAT scheme
We compare the Flat Rate Scheme, cash accounting and annual accounting with the standard method, using your own numbers, and recheck as you grow.
Making Tax Digital VAT returns
We prepare and check each return from your digital records and file it through compatible software ahead of each deadline.
Clean records behind every return
Cloud accounting software such as Xero keeps your VAT records up to date, so the figures on your return match your accounts.
HMRC letters and penalties
If HMRC writes about a late return, penalty points or a payment, we explain what it means and deal with HMRC for you.
Cancelling your registration
If your turnover falls or you stop trading, we check whether you can or must deregister and handle the final return.
Key VAT figures for 2026/27
These are the main VAT thresholds, rates and deadlines for the 2026/27 tax year. They apply across the whole UK. Every figure was checked against GOV.UK on 15 October 2026.
| Item | 2026/27 | Who it applies to | Source |
|---|---|---|---|
| VAT registration threshold | £90,000 | Taxable turnover in any rolling 12 months, or expected in the next 30 days alone. Unchanged since 1 April 2024. | GOV.UK |
| Deregistration threshold | £88,000 | You can ask HMRC to cancel your registration if taxable turnover falls below this. | GOV.UK |
| Standard rate | 20% | Most goods and services | GOV.UK |
| Reduced rate | 5% | Some goods and services, such as children's car seats and home energy | GOV.UK |
| Zero rate | 0% | Zero-rated goods and services, such as most food and children's clothes | GOV.UK |
| VAT return and payment deadline | 1 calendar month and 7 days after the period ends | Standard VAT periods, usually quarterly | GOV.UK |
| Flat Rate Scheme: joining limit | £150,000 or less (excluding VAT) | Expected taxable turnover for the next year | VAT Notice 733 |
| Flat Rate Scheme: leaving limit | More than £230,000 (including VAT) | Total income for the year | VAT Notice 733 |
| Limited cost trader flat rate | 16.5% | Flat Rate Scheme users spending less than 2% of turnover, or less than £1,000 a year, on relevant goods | VAT Notice 733 |
| Cash accounting and annual accounting: joining limit | £1.35 million or less | Estimated taxable turnover for the next 12 months | GOV.UK |
| Cash accounting and annual accounting: leaving limit | More than £1.6 million | Taxable turnover | GOV.UK |
| Late submission penalty | £200 | Charged once you reach the penalty points threshold (4 points for quarterly filers), and for each later late return | GOV.UK |
| Late payment penalties | 3% at day 15, a further 3% at day 30, then 10% a year | VAT periods starting on or after 1 April 2025 | GOV.UK |
| Late payment interest | Bank of England base rate plus 4% | From the first day VAT is overdue | GOV.UK |
Do I need to register for VAT?
You must register for VAT when your taxable turnover goes over £90,000. HMRC uses two tests, and you must register if either one applies to you (GOV.UK: when to register for VAT).
The rolling 12-month test (looking back)
At the end of every month, add up your taxable turnover for the last 12 months. If it is over £90,000, you must register within 30 days of the end of the month in which you went over. Your registration then takes effect from the first day of the second month after you went over.
GOV.UK's example: if you went over the threshold on 15 July, you must register by 30 August, and your registration takes effect from 1 September.
The 30-day test (looking forward)
You must also register if you expect your taxable turnover to go over £90,000 in the next 30 days alone, for example because you have just won a large contract. You must register by the end of that 30-day period, and your registration takes effect from the date you realised.
GOV.UK's example: you sign a £100,000 contract on 1 May. You must register by 30 May, with an effective date of 1 May.
This forward-looking test is easy to miss, because a single big order can trigger it in your first month.
Do I need to register for VAT as a sole trader?
Yes, on exactly the same tests as a company. A sole trader registers in their own name, because HMRC treats the sole proprietor as the "person" being registered (HMRC VATREG08150). The law measures the value of that person's taxable supplies (VAT Act 1994, Schedule 1, paragraph 1), so turnover from every business you run as a sole trader counts towards the same £90,000.
What counts as taxable turnover?
Taxable turnover is the total value of everything you sell that is not VAT-exempt or outside the scope of VAT. It includes zero-rated and reduced-rate sales as well as standard-rated ones. It also catches some less obvious items, such as goods you hire or lend to customers, business goods used for personal reasons, and services bought from overseas businesses under the reverse charge.
- Temporary spikes: if you go over the threshold only temporarily, you can ask HMRC for an exception from registering. HMRC writes to confirm whether you get one.
- Businesses based outside the UK: there is no threshold. You must register whatever your turnover if you supply, or expect within the next 30 days to supply, goods or services to the UK.
Should I register for VAT voluntarily?
It depends mainly on who your customers are. You can choose to register for VAT even if your turnover is below £90,000 (GOV.UK: register for VAT). Once registered, you must pay HMRC any VAT you owe from the date they register you, and you follow the same rules as everyone else, including Making Tax Digital.
Voluntary registration often suits businesses that:
- sell mainly to other VAT-registered businesses, which can usually reclaim the VAT you charge them;
- make mostly zero-rated sales, or pay a lot of VAT on their costs, so they would often get money back from HMRC;
- have set-up costs to recover. On registration you can usually reclaim VAT on goods bought in the 4 years before, if you still have them, and on services bought in the 6 months before (GOV.UK: reclaim VAT on business expenses).
It is usually less attractive if you sell to the public, because adding 20% either pushes up your prices or comes out of your margin. We run the numbers both ways before you decide.
When can a business claim VAT back?
Only once it is VAT-registered. You then reclaim VAT on items bought for use in the business through your VAT return, as long as you hold valid VAT invoices. If something is also for personal use, you can only claim the business proportion (GOV.UK: reclaim VAT on business expenses). VAT on costs that relate to exempt sales usually cannot be reclaimed, and on the Flat Rate Scheme you generally cannot reclaim VAT on purchases at all.
When can I deregister for VAT?
You can ask HMRC to cancel your VAT registration (deregister) if your taxable turnover falls below £88,000, the deregistration threshold for 2026/27. You must cancel within 30 days if you stop being eligible, for example because you stop trading or join a VAT group, or you may be charged a penalty (GOV.UK: cancel your VAT registration).
Before you deregister, check the stock and business assets you will still hold, as you may have to account for VAT on them in your final return.
What are the VAT rates in 2026/27?
The standard rate of VAT is 20%, the reduced rate is 5% and the zero rate is 0%. These rates are unchanged for 2026/27, and the standard rate has been 20% since 4 January 2011 (GOV.UK: VAT rates).
| Rate | % | Examples | Counts towards £90,000? |
|---|---|---|---|
| Standard | 20% | Most goods and services | Yes |
| Reduced | 5% | Some goods and services, such as children's car seats and home energy | Yes |
| Zero | 0% | Most food and children's clothes | Yes |
| Exempt | No VAT | Postage stamps, financial and property transactions | No |
The difference between zero-rated and exempt matters. Zero-rated sales are still taxable: they count towards the threshold, and you can normally reclaim the VAT on related costs. Exempt sales do not count towards the threshold, and VAT on costs that relate to them usually cannot be reclaimed. To add VAT to a price or take it off at these rates, use our VAT calculator.
How do VAT returns and MTD for VAT work?
Every VAT-registered business must keep digital records and file its VAT returns through software that is compatible with Making Tax Digital (MTD), including businesses that registered voluntarily. MTD has applied to all VAT-registered businesses since their first VAT period starting on or after 1 April 2022 (VAT Notice 700/22).
- How often: VAT returns are usually due every 3 months.
- Return deadline: one calendar month and 7 days after the end of the VAT period. For a quarter ending 30 June, that is 7 August (GOV.UK: VAT return deadlines).
- Payment deadline: the same date. Payment must reach HMRC by then, even if the deadline falls on a weekend or bank holiday.
- Direct Debit: HMRC collects 3 working days after the deadline, as long as the Direct Debit was set up at least 3 working days before you submit the return. If you file late, it is taken 3 days after you file.
- Nil returns: you must still file a return even if there is no VAT to pay or reclaim.
- Records: keep your VAT records for at least 6 years (VAT Notice 700/21).
HMRC can exempt you from MTD for VAT if using computers, software or the internet is not reasonable or practical for you because of age, health, disability or where you live, or if you object to using computers on religious grounds. You have to apply. Businesses in an insolvency procedure, and those sending a final return after cancelling their registration, are exempt automatically (GOV.UK: MTD for VAT exemptions).
We work with cloud accounting software such as Xero, so each return is built from the same records as your accounts. If your records need some work before your VAT returns can be relied on, our bookkeeping service can sort that out first.
What changes are coming for VAT?
- E-invoicing from 2029: the government has announced that all VAT invoices between businesses, and from businesses to the public sector, must be electronic from 2029, with a roadmap due at Budget 2026. This is announced policy, not yet law (GOV.UK consultation response).
- Paying by Direct Debit: HMRC consulted from 23 June to 16 August 2026 on requiring VAT and PAYE return liabilities to be paid by Direct Debit. It is a proposal, not a confirmed requirement, and the government's response is awaited (GOV.UK consultation).
Which VAT scheme should I use?
HMRC offers three schemes that can make VAT simpler or cheaper for smaller businesses: the Flat Rate Scheme, cash accounting and annual accounting. Which one helps, if any, depends on your turnover, your margins and who your customers are.
| Scheme | How it works | You can join if | You must leave if |
|---|---|---|---|
| Flat Rate Scheme | You pay HMRC a fixed percentage of your VAT-inclusive turnover and generally cannot reclaim VAT on purchases | Expected taxable turnover for the next year is £150,000 or less, excluding VAT | Total income for the year is more than £230,000, including VAT |
| Cash accounting | You pay VAT on sales when your customers pay you, and reclaim VAT on purchases when you pay your suppliers | Estimated taxable turnover for the next 12 months is £1.35 million or less | Taxable turnover is more than £1.6 million |
| Annual accounting | One VAT return a year, with advance payments during the year | Estimated taxable turnover for the next 12 months is £1.35 million or less | Taxable turnover is, or is likely to be, more than £1.6 million at the end of the year |
The VAT Flat Rate Scheme and the 16.5% limited cost trader rate
On the Flat Rate Scheme you still charge customers VAT at the normal rate, but you pay HMRC a fixed percentage of your VAT-inclusive turnover. The percentage depends on your type of business, and you get a 1% reduction in your first year of VAT registration, unless you registered more than 12 months after you were required to (VAT Notice 733).
If you are a limited cost business, you must use a flat rate of 16.5%, whatever your trade. You are one if your spending on relevant goods, including VAT, is less than 2% of your flat rate turnover or less than £1,000 a year. The test applies to each VAT return period, using a proportion of the £1,000 for shorter periods (£250 for a quarterly return), and many consultants and other service businesses fall into it.
Our worked example: a consultant invoices £10,000 plus £2,000 VAT. Under the standard method they pay HMRC the £2,000, less any VAT they can reclaim on costs. At the 16.5% limited cost rate they pay 16.5% of £12,000, which is £1,980, and cannot reclaim VAT on most costs. The saving is £20 at best, so for most limited cost businesses the scheme is not worth it. In the first year of VAT registration the 1% reduction brings the rate down to 15.5%, or £1,860, which still saves only £140 before any VAT lost on costs.
- If your total income goes over £230,000, you can stay in the scheme only if HMRC is satisfied that your total income in the next 12 months will not exceed £191,500.
- You cannot use the Flat Rate Scheme together with cash accounting. It has its own cash-based turnover option instead.
- If you leave the Flat Rate Scheme, you cannot rejoin for 12 months.
The VAT cash accounting scheme
Cash accounting helps cash flow when customers pay slowly, because you only pay VAT on a sale once the customer has paid you. You cannot use it if you are behind with VAT returns or payments, or have committed a VAT offence in the last 12 months (GOV.UK: cash accounting eligibility).
Annual accounting
You file one VAT return a year, due 2 months after the end of your annual accounting period. During the year you make advance payments of either 9 monthly instalments of 10% or 3 quarterly instalments of 25% of your estimated bill, then pay the balance with the return (GOV.UK: annual accounting deadlines). It means fewer deadlines, but you still need good records all year.
What happens if I file or pay VAT late?
A late VAT return earns a penalty point, and a £200 penalty once you reach your points threshold. Late payment brings separate penalties, starting at 3% of the VAT owed, plus interest. These rules apply to VAT periods starting on or after 1 January 2023.
Late returns: penalty points
Each late VAT return earns one point, including nil and repayment returns. When you reach the threshold for how often you file, you are charged a £200 penalty, plus another £200 for each later late return (GOV.UK: VAT penalty points).
| How often you file | Points threshold | Period of compliance to reset points |
|---|---|---|
| Annually | 2 points | 24 months |
| Quarterly | 4 points | 12 months |
| Monthly | 5 points | 6 months |
Points below the threshold expire after about 24 months (25 months if the deadline was the last day of a month). Once you reach the threshold, your points only go back to zero after you have filed on time for the whole period of compliance and sent any outstanding returns for the previous 24 months (GOV.UK: removing penalty points).
Late payment penalties
There is no penalty if you pay within 15 days of the due date. After that, the penalties for VAT periods starting on or after 1 April 2025 are (GOV.UK: VAT late payment penalties):
| When the VAT is paid | Penalty |
|---|---|
| Within 15 days of the due date | No penalty |
| Day 16 to day 30 | 3% of the VAT owed at day 15 |
| Day 31 or later | 3% of the VAT owed at day 15, plus 3% of the VAT still owed at day 30, plus a second penalty of 10% a year charged daily on the balance until it is paid |
Our worked example: £10,000 of VAT still unpaid at day 15 and paid on day 20 costs a £300 penalty. If it is still unpaid at day 30, another £300 is added, and from day 31 the second penalty builds at about £2.74 a day (10% a year on £10,000), on top of interest.
Agreeing a Time to Pay arrangement with HMRC can stop the penalty running. Late payment penalties do not apply to VAT payments on account or to annual accounting instalments. For VAT periods that began before 1 April 2025 the rates were lower: 2%, 2% and 4% a year.
Late payment interest
HMRC charges interest on late VAT from the first day it is overdue, at the Bank of England base rate plus 4%, so the rate moves whenever base rate changes. Interest is also charged on penalties that are paid late. If HMRC owes you a repayment, it pays repayment interest at base rate minus 1%, with a minimum of 0.5% (GOV.UK: VAT late payment interest).
How our VAT assistance works
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1
A free call
We look at your turnover, your customers and your costs to see whether you need to register now, soon or not at all.
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2
Set-up
We register you with HMRC or take over your existing VAT, choose the scheme that suits you and set up compatible software.
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3
Every return
We prepare and check each return from your records, flag anything unusual and tell you what is due before we file.
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4
All year round
We keep track of deadlines, thresholds and scheme limits as your business changes, and deal with HMRC if anything comes up.
Work out your VAT before you pick up the phone
VAT calculator
Quick VAT sums for prices and invoices at the 2026/27 rates.
Try it ServiceBookkeeping
Up-to-date digital records, so every VAT return is built on the right numbers.
Find out more GuideSetting up a limited company
Registrations, first deadlines and planning for VAT before you have to register.
Read the guide DeadlinesTax deadlines 2026/27
The key tax dates for the year in one place, so nothing turns into a penalty.
See the datesFree white paper
Setting up your business: 2026/27
Ten practical tips for a new business, from choosing the right structure and share classes to registering for corporation tax and planning for VAT before you have to.
Frequently asked questions about VAT
What is the VAT threshold in the UK for 2026/27?
The VAT registration threshold for 2026/27 is £90,000 of taxable turnover, the same as it has been since 1 April 2024. You must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. The deregistration threshold is £88,000.
Do I need to register for VAT as a sole trader?
Yes, if your taxable turnover goes over £90,000 in any rolling 12 months, or you expect it to go over £90,000 in the next 30 days alone. The tests are the same as for companies. You register in your own name, and the test looks at all your taxable sales, so turnover from every business you run as a sole trader counts towards the same £90,000.
How long do I have to register for VAT after going over the threshold?
Under the rolling 12-month test you must register within 30 days of the end of the month in which your turnover went over £90,000, and your registration takes effect from the first day of the second month after you went over. Under the 30-day test you must register by the end of that 30-day period, with effect from the date you realised you would go over.
Do zero-rated sales count towards the VAT threshold?
Yes. Zero-rated sales are taxable supplies, so they count towards the £90,000 threshold along with reduced-rate and standard-rated sales. Exempt sales, such as most financial and property transactions, and sales outside the scope of VAT do not count.
Should I register for VAT voluntarily?
It can make sense if you sell mainly to VAT-registered businesses, make mostly zero-rated sales or pay a lot of VAT on your costs, because you can reclaim that VAT. It is usually less attractive if you sell to the public, because adding 20% VAT either raises your prices or reduces your margin. Once registered you must follow all the VAT rules, including Making Tax Digital.
When can a business claim VAT back?
Only once it is VAT-registered. You reclaim VAT on items bought for use in your business through your VAT return, and you need valid VAT invoices. If something is also for personal use, you can only claim the business proportion. When you first register, you can usually reclaim VAT on goods bought in the previous 4 years that you still have, and on services bought in the previous 6 months.
Do I have to use software for my VAT returns?
Yes, in almost all cases. Making Tax Digital for VAT requires every VAT-registered business, including those that registered voluntarily, to keep digital records and file returns through compatible software. HMRC can grant an exemption if using software is not reasonable or practical, for example because of age, disability or where you live, or on religious grounds.
What is the penalty for a late VAT return?
Each late VAT return earns one penalty point. Once you reach the threshold (2 points for annual filers, 4 for quarterly and 5 for monthly) you are charged £200, and another £200 for each later late return. Late payment is penalised separately: nothing if you pay within 15 days, then 3% at day 15, a further 3% at day 30 and 10% a year from day 31, plus interest.
What is a limited cost trader on the Flat Rate Scheme?
A limited cost trader is a business on the Flat Rate Scheme whose spending on relevant goods, including VAT, is less than 2% of its flat rate turnover or less than £1,000 a year. It must use a flat rate of 16.5%, whatever its trade. At 16.5% of VAT-inclusive turnover, many service businesses gain little or nothing from the scheme.
How much does an accountant charge for a VAT return?
It depends on how often you file, how many transactions you have, the state of your records and which VAT scheme you use, so we don't quote a standard price. We look at your business first and give you a clear quote before we start, so you'll know exactly what you're paying for. You can ask for a free quote or book a free call.
Written and reviewed by George Nicholson BFP ACA, ICAEW Chartered Accountant. Last reviewed 20 October 2026. This page is general information, not personal advice.
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