UK VAT Explained: Thresholds, Schemes and Common Mistakes

UK VAT is straightforward — until it isn’t. Here’s a plain-English overview.

When you must register

Once your taxable turnover exceeds £90,000 in any rolling 12-month period (2024 threshold), you must register within 30 days.

The schemes

• Standard accounting — pay VAT when invoiced.
• Cash accounting — pay VAT only when paid (great for cash-flow under £1.35M turnover).
• Flat Rate Scheme — pay a fixed % of gross turnover. Simple, but rarely cheaper since the 2017 limited-cost trader rules.
• Annual accounting — one return per year with payments on account.

The five most expensive mistakes

1. Missing voluntary registration when most clients are VAT-registered (you’re leaving reclaim money on the table).
2. Reclaiming VAT on entertainment (you can’t — except for staff).
3. Wrong VAT rate on food (the cake/biscuit border is real).
4. Not splitting VAT on Amazon/Shopify deposits.
5. Forgetting reverse charge for services from EU/US suppliers.

Try the free calculator

Use our UK VAT calculator for quick add/remove VAT calculations.