From 1st April 2024 the VAT threshold increased from £85k to £90K, this means if your turnover goes over this amount you will need to be registered with HMRC within 30 days of the end of the month you went over.
Businesses with turnover below the £90K threshold limit can also apply voluntarily to register for VAT. This can be advantageous to your business as can help you to improve the cash flow of your business because you will be able to claim back VAT on costs. However, voluntary registration may not be the best option for you if your customers aren’t registered for VAT or you operate on a B2C basis, since they wouldn’t be able to claim it back. This could lead to them feeling like your prices have gone up.
Output and input VAT
Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. On the other side of the coin, VAT will be payable on most goods and services purchased by the business. This is known as input VAT.
The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them. However, the input VAT suffered on most goods and services purchased for the business can be deducted from the amount of output tax owed to HMRC.
If your input tax is greater than your output tax, HMRC will owe you a refund.
Benefits of being VAT registered
Some business owners believe being VAT registered is a hassle. Yes, there is certainly more admin required, but many businesses will only deal with companies that are VAT-registered, which means you have a wider pool of options available to you.
Being VAT registered can also offer credibility to your business, it creates an image that your company is bigger than it actually is. You receive a VAT number, which will be visible on all documents i.e. sales invoices and quotes. This also appeals to many businesses as it portrays a more trustworthy and professional outfit.
You can also claim claim 20% VAT on all vatable expenses i.e. accountancy fees, materials and equipment.
VAT businesses and Making Tax Digital
Making Tax Digital requires businesses to manage their tax affairs with HMRC using compatible software.
Making Tax Digital (MTD) is part of the Government’s plan to modernise the UK tax system, making it easier for people to get their tax right.
All VAT-registered businesses must comply with MTD for VAT rules, unless they are exempt.
VAT-registered businesses are required by law to maintain their digital records.
Businesses need to use compatible, HMRC-recognised MTD software to keep digital records and file VAT returns.
Here at Whitehall, we simplify your business tasks with XERO accounting software.
Xero is an all-in-one platform to simplify your business tasks. Track cash flow, invoice instantly, and file digital tax returns.
Please contact Whitehall if you need to be VAT registered or if you require us to complete your VAT returns. We can help save you time, improve accuracy and make your business more efficient.
Comments