VAT Threshold: Tax Efficient Top Tips

VAT ThresholdThis article provides details on the current VAT threshold for UK taxable sales with examples of how the threshold for VAT is calculated. Plus some great VAT tips.

Please note that the below thresholds for registering for VAT or joining a VAT accounting scheme are valid from 1 April 2015.

What is the VAT threshold

Different countries have different VAT thresholds. However, if you are trading in the UK the VAT registration threshold is currently £82,000 of taxable sales. This means that if you have sales that would be subject to zero or standard VAT you need to the check the level of sales in a 12 month period to see if it is under or over the VAT threshold.

VAT Thresholds 2015

CircumstanceThreshold
VAT registrationMore than £82,000
Registration for distance selling into the UKMore than £70,000
Registration for bringing goods into the UK from the EUMore than £82,000
Completing simplified EC Sales List£106,500 or less and supplies to EU countries of £11,000 or less

VAT Accounting Scheme Thresholds 2015

VAT accounting schemeThreshold to join schemeThreshold to leave scheme
Flat Rate Scheme£150,000 or lessMore than £230,000
Cash Accounting Scheme£1.35 million or lessMore than £1.6 million
Annual Accounting Scheme£1.35 million or lessMore than £1.6 million

VAT Threshold Example

Helen has a sole trader business providing beautician services and also trains other beauticians. If the training/education Helen is provided by a sole proprietor (which in this case it is) the tuition is exempt for VAT purposes, however, the beautician services are taxable supplies.

Her total sales for the last month is

£84,000 so she is concerned that she should have been VAT registered, however, upon analysis of the sales, £65,000 of the sales relate to beautician services and

£19,000 relate to training.

Therefore only the £65,000 counts towards the threshold, so she is still within the VAT threshold, and does not have to compulsorily register for VAT.

What if I have a variety of sales

If you have a mixture of sales, some of which would be exempt from VAT and some that are subject to VAT then you just calculate if you have reached the VAT threshold by measuring the amount of sales that are subject to VAT. Zero and standard rated goods or services are considered taxable supplies, however, exempt goods or services are non-taxable supplies.

Can I split my businesses

If you genuinely have a variety of trades then you could incorporate the separate businesses, for example you might have a coffee shop and a consultancy business. Please note that you shouldn’t artificially separate your trades to avoid being over the VAT threshold, if HMRC decide that you have done this they can decide that the entire business is a single taxable person and therefore must be registered for VAT.

Top VAT Tips

  • Review your business to see if it is more suitable for cash or accrual VAT accounting.
  • If your business is under £150,000 revenue consider whether the Flat Rate VAT scheme may be best for you.
  • If you are at the cusp of being near the VAT threshold make sure you check your figures every month, as HMRC can look at any 12 month period, not just your usual tax year.
  • If your business has shrunk recently, review whether it is still appropriate to be VAT registered. If your business is to the general public your prices may be more attractive if you don’t have to charge VAT.
  • Make sure you have a good system for calculating VAT, unless you have a very low number of transactions we would recommend that you use a basic accounting system, such as Sage One, QuickBooks or KashFlow.

Historical Previous VAT Thresholds – Registration limits for taxable supplies

Before 21 March 1990 the rules were different. You had to look at your past and future taxable turnover when deciding whether you needed to register. There was also a yearly limit and a 3-monthly limit.

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2016-10-23T17:24:25+00:00August 25th, 2012|Tax|9 Comments

About the Author:

Nicky Larkin
Nicky Goringe Larkin is a Chartered Management Accountant who founded Goringe Accountants Ltd. - British Accountancy Awards 2013 Runners Up and awarded 'Highly Commended' accolade.Nicky is also Chair of the regional Federation of Small Businesses (FSB) as she is passionate about ensuring that Small Business issues are heard at the local and national level.
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