Voluntary VAT registration means registering for VAT before your turnover reaches the £90,000 threshold. You do not have to, but many businesses choose to, usually to reclaim VAT on costs or to look more established.
Who it suits
Voluntary registration tends to help when:
- You sell mainly to other VAT registered businesses, who can reclaim the VAT you charge
- You buy a lot of goods or services with VAT on them, so you can reclaim that VAT
- You want your business to look larger and more settled to clients
Who should think twice
It can work against you when:
- You sell mainly to the public, who cannot reclaim VAT, so your prices rise by up to 20%
- You have few VAT bearing costs, so there is little VAT to reclaim
- You want to keep paperwork light, since registration brings returns and records
The main benefits
Reclaim VAT on your costs. Once registered, you can claim back the VAT on business purchases. You may also reclaim VAT on some goods bought in the four years before registration, and on some services from the six months before, if you still use them in the business.
Look more established. A VAT number can make a small business look more serious to larger clients.
Avoid a sudden jump. If you are growing toward £90,000, registering early avoids a rushed change later.
The main drawbacks
Higher prices for some customers. If your buyers cannot reclaim VAT, adding it makes you dearer.
More admin. You must charge VAT, keep digital records, and file VAT returns under Making Tax Digital.
[ Infographic: Is voluntary VAT registration worth it ]
Brief: two paths. Sell to businesses or have high VAT costs points to yes. Sell to the public with low VAT costs points to think twice.
Alt text: A simple decision guide for voluntary VAT registration based on who you sell to and your costs.
Caption: Who you sell to usually decides whether early registration pays off.
How to register voluntarily
The steps are the same as any VAT registration. You apply online on GOV.UK, give your business details, and choose the date you want your registration to start. After that you charge VAT and file returns like any registered business.
Frequently asked questions
Can I register for VAT below the threshold? Yes. Registering below £90,000 is called voluntary registration and is allowed.
Is voluntary VAT registration worth it? It often pays off if you sell to other VAT registered firms or have high VAT costs. It can cost you if you sell to the public and have few VAT bearing costs.
Can I reclaim VAT from before I registered? You may reclaim VAT on some goods bought in the four years before registration and some services from the six months before, if they relate to the business.
Does voluntary registration mean more paperwork? Yes. You must charge VAT, keep digital records and file VAT returns, the same as any registered business.