Do You Have To Register For VAT If You're A Sole Trader?

VAT if sole trader

If you’re a sole trader, you might be thinking about whether or not to register for VAT. We know that it can be a bit confusing, so we’ve put together a quick guide to help you understand what it means to register for VAT.

We know that as a sole trader, it can be difficult to find someone who understands your business – That’s why we’re here for you.

We’re a professional accounting practice based in Oxford, UK, offering bespoke bookkeeping and accounting solutions that are tailored to meet your business’s needs.

Whether you’re just starting out or have been running your own company for years, Joanna Bookkeeping can help with everything from setting up your accounting software to providing bookkeeping and accounting services and reporting. We’ll even manage the VAT returns that come with being a sole trader, saving you time so you can focus on growing your business!

What is VAT?

VAT stands for value-added tax and it’s a type of indirect tax. An indirect tax means it’s a tax that is imposed on a business or an individual by the government and it’s paid by another business or an individual. VAT basically makes you a middle man. You add VAT to your goods or services, your clients pay the price including VAT, and then you pass the VAT you collected onto HMRC. If you pay VAT when buying from your suppliers, you can deduct this tax from the tax collected from your clients and transfer a lower amount of tax to HMRC. This is VAT in a nutshell as it can be a quite complex topic.

When does a sole trader have to register for VAT?

You’ll have to register for VAT if you’re a sole trader and if you earn more than the VAT threshold in any rolling 12-month period. Currently, the VAT registration threshold is £90,000 of a taxable turnover meaning income (not profit) from all vatable supplies. Vatable supplies, so all supplies that are either standard-rated, reduced-rated, or zero-rated. Other supplies aren’t included in this figure and don’t count towards your taxable turnover. If your company makes less than this amount, then registering for VAT is not an obligation.

You must register for VAT if you’re a sole trader if:

*Regardless of VAT taxable turnover, you must also register for VAT if all of the following apply to you:

  • You’re based outside the UK
  • Your business is based outside the UK
  • You supply any goods or services to the UK (or expect to in the next 30 days)

*You can also choose to register for voluntary VAT if your turnover is less than £90,000.

➡️ Discover more about whether you should register for VAT.

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How do I register and pay my VAT?

You can register for VAT if you’re a sole trader either online or using the VAT1 form which then has to be posted to HMRC. In most cases, you will be able to register online which is easy and convenient.

Once HMRC receives your application and accepts it, you’ll get a confirmation of your VAT registration together with your VAT number which you will have to start using.

Making Tax Digital for VAT

Making Tax Digital (MTD) was made mandatory for all VAT registered businesses by HMRC in April 2022 to help individuals and businesses get their taxes right. This means many people are moving over to a new system that involves keeping digital records. All VAT registered businesses must comply, and use compatible software that can connect directly to HMRC. Find out more about Making Tax Digital for VAT from our other article.

If you have any questions about how to register for VAT as a sole trader, or if you want someone with experience in this area to handle everything for you, book a call with one of our Oxford-based accountants. They will be able to guide you through the steps of how to register for VAT if you’re a sole trader and advise you on all aspects of running your business, including choosing the right legal structure for your company, understanding how tax works, and making sure that everything is done correctly from day one onwards.

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