The basic VAT rate in the UK is 20%, which encompasses most products and services. Some, e.g. renovating houses, have a VAT rate of 5% or 0%. There is also a class of products and services which are not taxed.
Thanks to registering for VAT, you can deduct paid tax from your input tax. Therefore, in practice you are able to save more, while clients who are VAT payers will be more likely to choose your services.
Registration for VAT is possible through the HMRC online portal. To complete it, you will need, amongst other things, your business bank account details, your company registration certificate and your National Insurance number.
How you pay VAT largely depends on how big your company’s revenue is. Most businesses are covered by the ‘standard accounting scheme’, where they pay VAT each quarter.
If you no longer want to be a VAT payer, and if it isn’t legally mandatory, you can resign from being a VAT payer. Unfortunately, cancelling your registration can be a long and difficult process, during which you have to keep on paying the tax and adding it to your invoices.
The majority of entrepreneurs who start their business in the UK don’t have to register for VAT straightaway. Whether it is worth registering at this point is determined mainly by the services your company provides and also by your clients.
Generally, there are three specific factors which determine when it is mandatory to register for VAT:
After fulfilling at least one of these criteria, a business owner has a maximum of 30 days to register for VAT.
Even though registering for VAT is optional for a lot of businesses, it can bring a range of benefits. If you have a lot of company expenses which are recorded on VAT invoices, tax deductions will be able to generate extra savings. Additionally, large companies are often more likely to use the services of VAT-registered businesses because of this possibility of deducting tax and saving money.
However, registering for VAT also means an added responsibility. When paying this tax, a business owner has to send VAT invoices to HMRC, usually every quarter. Also, this form of tax usually isn’t beneficial when your business provides services mostly to individuals, rather than companies.
Whether it is worthwhile to voluntarily register for VAT depends on many factors, e.g. who your contractors are and what your company purchases are. If you are unsure whether this is the right choice for you, get in touch with us, and we will answer your every question! Are you already VAT -registered and looking for someone to look after your accounts? We will be happy to help with this too!
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With us, you will always get trustworthy and expert advice. Regardless of whether you are starting up a business in Great Britain, or whether your company has been on the market for years, we will always be happy to help you, and we will arrange everything so that you can reap as many financial benefits as possible. We are at your disposal every working day from 9am to 5pm.
When choosing our services, you always know what you will be getting. We never beat around the bush, and we inform you about every step we plan to take. You are given the price of a service before it is carried out, thanks to which you don’t have to worry about any hidden costs.