VAT for UK small businesses: the complete 2026/27 guide

When do you have to register for VAT?

You must register if your VAT-taxable turnover goes above £90,000 in any rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days alone. You can also register voluntarily below the threshold, which can help you reclaim VAT on costs. Use our guide to registering for VAT for step-by-step help.

VAT rates

VAT schemes for small businesses

• Standard accounting: charge VAT on sales, reclaim VAT on purchases and pay the difference.
• Flat Rate Scheme: pay a fixed percentage of VAT-inclusive turnover. You can join if taxable turnover is £150,000 or less. Limited cost businesses pay 16.5%. See our Flat Rate Scheme calculator.
• Cash accounting: account for VAT when you are paid, not when you invoice.
• Annual accounting: one return a year with advance payments.

VAT returns and Making Tax Digital

Most businesses file VAT returns quarterly, online, through MTD-compatible software, and pay HMRC by the deadline. Keep digital records of every sale and purchase, and issue proper VAT invoices. Our bookkeeping keeps your VAT records ready.

Deregistering from VAT

You can ask HMRC to cancel your registration if your taxable turnover for the next 12 months will be below £88,000.

Worked example: standard VAT or Flat Rate Scheme?

A business has £100,000 of VAT-exclusive turnover and pays £4,000 of VAT on its purchases. On standard accounting it pays £20,000 of output VAT less £4,000 of input VAT, which is £16,000. On the Flat Rate Scheme at 14.5% it pays 14.5% of its £120,000 VAT-inclusive turnover, which is £17,400. Standard VAT would be £1,400 cheaper. The scheme tends to suit businesses with few VAT-bearing costs, so always compare before you join.

What a VAT invoice must show

• Your name, address and VAT number.
• The invoice date and a unique number.
• A description of what you supplied and the amount excluding VAT.
• The VAT rate and the amount of VAT charged.

What VAT can you reclaim?

You can usually reclaim VAT on goods and services bought for the business, as long as you hold a valid VAT invoice. You generally cannot reclaim VAT on business entertainment, and special rules apply to cars and fuel. Keep records of every purchase.

Return and payment deadlines

For most businesses on quarterly returns, both the VAT return and the payment are due one month and seven days after the end of the VAT period. Direct debit payments are usually taken a few days later. Late returns can attract penalties and interest, so set reminders or let us file for you.

Common VAT mistakes

• Registering late and owing VAT you did not charge.
• Charging the wrong rate.
• Reclaiming VAT without a valid invoice.
• Missing return deadlines.

VAT for London businesses

London restaurants, retailers and online sellers often cross the threshold quickly. We register and file for VAT-registered businesses across London, including pages for Westminster and Hackney bookkeeping.