Should I register for VAT early?

What are 

the benefits

if I register for VAT early?

If you've already read my previous post "3 common questions about VAT" then you will know that you can voluntarily register for VAT early.
When I say this you might be wondering why the heck any sane person would want to register for VAT when they don't have to. Surely that is a pain in the ass and a lot of extra work, right? Well, yes and no. It isn't suited everyone, but there are in fact some very good reasons why you might want to register early.
In this short post we are going to look at some of the main benefits of doing just that.

Are you starting

A UK business?

As a reminder, the information I am sharing here is relevant to businesses in the UK, which is where I am based.

But wherever you are in the world, when you start a business you need to be aware of any sales taxes that might apply to you. Read through the post and then check your government website to see what you need to do.


I'm Naomi

I help people start and grow businesses simply and without stress.

I'm sharing the key start up info you need, so it's easy to understand & implement.

If you have a new business or VAT question you'd like help with, you can reach out to me here.

a quick re-cap

of when to register for VAT

In case you've not read the previous post, to re-cap – every business by law has to register for VAT when their turnover (gross sales) reaches £85,000 in a 12 month period. 

It doesn't matter what business you are running, if you are nearing that £85,000 threshold then you need to look at registering. In case that is you, you can register using this link which will take you to the gov.uk website. I also recommend booking an appointment with an accountant if you haven't done so, so that you can make sure you are doing everything correctly.

But if you are starting a business from scratch, or you have a very small business and are nowhere near that turnover, then you don't need to do anything. Just remember that figure in case your sales start to increase.

This post is all about the benefits you could get if you register for VAT early, and so that's what we're going to look at next.

What Are the benefits of
registering for VAT early?

New business owners often dislike the idea of VAT. It's confusing to them and there are lots of myths for sure, and so it is easy to avoid thinking about it. But for some businesses there are several advantages to registering early. 

benefit 1

You can claim the VAT back on business supplies and expenses

These are things like laptops, phones, stationary, domain names, and services you buy in (accountancy, hosting etc). If you use it solely for your business, when you register for VAT you can claim the VAT back on all of these, potentially saving you a lot of money.

This is probably the biggest benefit of all, and will suit any business that has incurred large costs.


You aren’t having to increase your prices to your clients to cover the VAT

If you buy in services and goods that form the service that you provide your clients, then you can claim the VAT back. This will makes it either less expensive to your client or more profitable to you, so it’ a win win!

This is especially helpful to service businesses who are selling to other businesses (B2B).

When I started my marketing agency I bought in services like printing, and I was spending tens of thousands on it, plus buying in advertising space in media for my clients, and catering for events. If I wasn’t VAT registered, the VAT that I was charged by these suppliers (usually 20%) I would either have to lose in my profits or pass on to my client by increasing my prices.

For a service business like mine, being VAT registered was much more appealing to potential clients, and also made financial sense to me.


Your clients can claim the VAT back as well

If you provide a service to other businesses or sell products wholesale to retailers (B2B) and you register for VAT, you are enabling your clients to claim the VAT back that you charge them (assuming they are also VAT registered).

They will prefer this; it is more appealing to them and easier to account for.


Your business appears more professional

This isn’t necessarily important for everyone, but if you sell to other businesses then it really does help. You want to give the right impression, especially if you are pitching for business or quoting for a job. Being VAT registered can often be an extra tick in the box for a client.


You are setting your business up for longevity

By becoming VAT registered earlier you will get yourself into really good accounting habits. You also won’t have to re-learn how to do your accounts or buy new accountancy software if you later reach that £85k threshold and have to register.

If you are just starting, or have a business and you plan to have turnover more than £85k (always aim high), if you put the groundwork in from the beginning you can save yourself time, money and effort.

If you can master this early on (it’s easier than you think), then you’ll leave yourself more time to focus on growing your business rather than worrying about VAT.

who is it best for

& what should you do?

Now you know what the benefits could be by registering early, you might be wondering which businesses it suits the most and if your business is one of them. Well it really depends on what you do.

As you can see it will definitely suit businesses who are selling to other businesses (B2B), especially if they incur lots of costs.
It will also suit businesses that sell products directly to consumers (B2C). Especially if they are being charged VAT buying in stock or supplies to make the products that they sell. If this is you, just remember that you will have to charge VAT too, which means adding it to your prices. That is why it's worth thinking about this right at the beginning of your new business journey so you only have to set your prices once.

Book an appointment with an accountant to talk about which option will work best for you!

The best thing you can do to make sure that registering early is right for you is to think about the industry you are in, how many costs you are regularly incurring that you could claim back, and whether or not you think that at some point you will reach the £85,000 per year threshold.

This last point is really important, because it really will save you so much time and effort registering now if you think that applies.

I highly recommend booking an appointment with an accountant to talk about which option will work best for your specific business. If you haven't got an accountant yet, the first session is often free, and you might get the answers you need in that session.

And if you'd like to ask me a question, whether it's VAT or new business related, you can reach out to my team and I anytime. We always do our best to answer all the questions we receive.

You can also book a one to one session directly with me, so we can work together to get your business moving in the right direction.

If you found this content helpful, please make sure that you check back regularly for new posts, or better still subscribe to the mailing list. I send out a weekly email with all the latest posts so you don't miss them, as well as tips to help you start and grow your business. 

here's to your massive success!

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