Published: 16/07/2024 By Hannah Duncan
HM Revenue and Customs (HMRC) has introduced a new digital tool to help businesses understand the implications of registering for VAT, following the recent increase in the VAT threshold to £90,000. The VAT Registration Estimator was created in response to feedback from small businesses, highlighting the need for an online resource to demonstrate when VAT registration might be required and its impact on profits.Businesses are required to register for VAT if:
- Their total VAT taxable turnover for the previous 12 months exceeds £90,000. (Prior to 31 March 2024, this threshold was £85,000.)
- They expect their turnover to exceed £90,000 within the next 30 days.
- They are an overseas business supplying goods or services to the UK, regardless of their VAT taxable turnover.
A VAT-registered business must charge VAT on eligible sales and can typically reclaim it on eligible purchases. The VAT Registration Estimator is designed to guide businesses in determining whether VAT registration is necessary and allows them to test various financial scenarios. However, it is not intended to provide personalised business advice. The tool aims to reduce the volume of general VAT inquiries to HMRC helplines and supports HMRC’s shift towards a digital-first approach to tax administration.
Using the VAT Registration Estimator
To use the estimator, businesses will need information about their income, costs, and applicable VAT rates. Here are the steps to follow:
- Business Location: Indicate whether the business is or will be based in the UK.
- Financial Estimates: Enter approximate business income and costs for up to 12 months. This tool is also useful for new businesses.
- VAT Rates: Use the provided guidance to select the VAT rates applicable to your income and costs — whether zero, reduced, standard rated, or VAT exempt.
- Pricing Preference: Decide if VAT should be added to or absorbed into the current or estimated selling price.
- Review and Results: Check your entries and complete the form to review the results, which can be saved and printed.
The tool is accessible through GOV.UK guidance pages, and HMRC ensures that no details input into the estimator are recorded. It is available 24/7, free to use, and typically takes about 20 minutes to complete on the first use. This estimator not only assists businesses near the threshold but is also a valuable resource for those considering voluntary VAT registration.
Access the tool here or visit GOV.UK and search ‘VAT Registration Estimator’ to access the tool
Furthermore, if you would like our advice on your VAT position, please don’t hesitate to contact us by calling 020 8661 7878 or email bsg@turpinba.co.uk