Voluntary VAT Registration: Pros, Cons and When It Pays

Voluntary VAT registration means registering your business for VAT before its taxable turnover reaches the £90,000 threshold. It pays when most of your customers are VAT-registered businesses and you have VAT on your own costs to reclaim. It rarely pays when you sell to the public, because you must add 20% VAT to your prices. This guide sets out the pros and cons, a quick decision table by customer type, and what changes once you are registered.

What Is Voluntary VAT Registration?

A UK business must register for VAT when its taxable turnover for the last 12 months goes over £90,000, or when it expects to go over £90,000 in the next 30 days alone. Below that, registration is optional: HMRC lets you choose to register, as long as you make taxable supplies. From your effective date of registration you charge VAT on your sales and reclaim VAT on your business purchases, and you must pay HMRC any VAT you owe from that date. The compulsory rules are covered in our VAT registration guide.

Should You Register for VAT Voluntarily? Decision Table

Your customers or costs	Register voluntarily?	Why
Mostly VAT-registered businesses	Usually yes	They reclaim the 20% you add, so your price to them does not really rise, and you reclaim VAT on your costs.
Mostly consumers (no VAT reclaim)	Usually no	You either raise prices by 20% or absorb it from your margin.
Large up-front costs with VAT (equipment, stock, software)	Often yes	You can reclaim the VAT on those purchases from your effective date of registration.
Mostly zero-rated sales	Often yes	You charge 0% VAT but can still reclaim VAT on your costs, which can mean regular refunds.
Mostly VAT-exempt sales	Usually not possible	You do not have to register if you only make exempt or out-of-scope supplies.

The Advantages of Registering Early

You reclaim VAT on your costs. Software, equipment, professional fees and stock bought for the business all carry VAT you can reclaim on your VAT Return.
Business customers do not lose out. A VAT-registered customer reclaims the VAT you charge, so the real cost to them stays the same.
Some larger clients expect it. Many businesses prefer suppliers with a VAT number, and some procurement processes ask for one.
No rush at the threshold. If you are growing fast, registering early avoids missing the 30-day forward test and having to charge VAT you did not plan for.

The Disadvantages

20% on consumer prices. Customers who cannot reclaim VAT pay more, or you absorb it and earn less.
Regular VAT Returns. You usually send a VAT Return every 3 months, and the deadline to file and pay is usually one calendar month and 7 days after the end of the period, even if there is nothing to pay.
Making Tax Digital. VAT Returns must be sent using software compatible with Making Tax Digital, so you need to keep digital records.
Penalties for late returns or payments. Registration brings deadlines you have to meet every quarter.

Is the Flat Rate Scheme Worth It for Small Businesses?

If you register voluntarily, the Flat Rate Scheme can make VAT simpler. You can join if you expect VAT taxable turnover of £150,000 or less in the next 12 months. Instead of working out VAT on every sale and purchase, you pay HMRC a fixed percentage of your turnover, set by your type of business, and keep the difference.

You cannot reclaim VAT on purchases, except certain capital assets over £2,000.
You get a 1% discount on your flat rate in your first year as a VAT-registered business.
If you spend very little on goods (less than 2% of turnover, or less than £1,000 a year), you are a “limited cost business” and pay a higher rate of 16.5%.

The Flat Rate Scheme suits service businesses with few VAT-able costs. Ask an accountant whether it works out cheaper for you.

Businesses Based Outside the UK

The threshold does not help overseas businesses. If you and your business are based outside the UK and you supply goods or services in the UK, or expect to within the next 30 days, you must register for VAT regardless of turnover. If you are not sure whether this applies, HMRC’s guidance on non-established taxable persons explains the test.

How to Register Voluntarily

Check you make taxable supplies (not only VAT-exempt or out-of-scope ones).
Choose your effective date of registration: the date you start charging VAT.
Estimate your taxable turnover for the next 12 months at the standard, reduced and zero rates.
Decide whether to join the Flat Rate Scheme or the Annual Accounting Scheme.
Register online with HMRC, or let us prepare and submit it for you.

CorpAssist’s VAT registration service asks HMRC’s questions in plain English, checks your answers and submits the registration for £69.99. Still deciding how to run your business? See sole trader vs limited company.

Register for VAT Without the Paperwork

If voluntary registration makes sense for you, CorpAssist handles it:

VAT registration prepared and submitted to HMRC for £69.99; HMRC does not charge
One online questionnaire, with turnover, start date and scheme questions explained in plain English
A person checks every answer before we submit
Works for directors living outside the UK

Start — £69.99 What is included

Frequently Asked Questions

Can I register for VAT if my turnover is under £90,000?

Yes. HMRC calls this voluntary registration. You can register at any turnover, as long as you make taxable supplies. Once registered, you charge VAT on your sales, file VAT Returns and pay HMRC any VAT you owe from your effective date of registration.

Is it worth registering for VAT voluntarily?

It usually pays when most of your customers are VAT-registered businesses, because they reclaim the VAT you charge, while you reclaim the VAT on your own costs. It usually does not pay when you sell to consumers, because adding 20% makes you more expensive or cuts your margin.

What are the disadvantages of voluntary VAT registration?

You must add VAT to your prices, send a VAT Return usually every 3 months using software compatible with Making Tax Digital, keep VAT records, and pay HMRC on time. Consumers cannot reclaim the VAT you charge, so it can make you less competitive.

What is the Flat Rate Scheme?

A simpler way to account for VAT for businesses expecting VAT taxable turnover of £150,000 or less. You pay HMRC a fixed percentage of your turnover, set by business type, and keep the difference, but you cannot reclaim VAT on purchases except certain capital assets over £2,000. You get a 1% discount in your first year; limited cost businesses pay 16.5%.

Do overseas businesses have a VAT threshold?

No. A business based outside the UK must register for VAT, regardless of turnover, as soon as it supplies goods or services in the UK (or expects to within 30 days). The £90,000 threshold only applies to UK-established businesses.

How much does it cost to register for VAT?

HMRC does not charge to register. CorpAssist prepares and submits your company’s VAT registration for £69.99, with a person checking your answers first.

Sources: Register for VAT and VAT Flat Rate Scheme on GOV.UK. This guide is general information, not tax advice.