You also need to know the right amount of VAT to reclaim on what you buy, because you can only claim back what you should have been charged – if your supplier charges you too much, you can’t claim all of it back.

VAT registration threshold

If you’re in business, you must register for VAT if your VAT taxable turnover for the previous 12 months is more than £82,000. This figure is known as the VAT registration threshold. The threshold changes – usually once a year announced in the Budget – so you should regularly check your turnover against the current threshold.

You must also register for VAT if either of the following applies:

  • You think your VAT taxable turnover may go over the threshold in the next 30 days alone
  • You take over a VAT-registered business as a going concern

De-registration threshold

The de-registration threshold is £80,000. If your VAT taxable.

Turnover for the year is less than or equal to £80,000, or if you expect it to fall to £80,000 or less in the next 12 months, you can either:

  • Stay registered for VAT
  • Ask for your VAT registration to be cancelled

If you decide to stay registered, you don’t have to do anything.

If you want to cancel your VAT registration you must write to HM Revenue & Customs (HMRC) to explain why your turnover has fallen. For example, you might have reduced your opening hours or lost contracts. You’ll also have to give an estimate of your turnover for the next year.

Remember that your VAT taxable turnover includes only the goods and services you sell that you have to charge VAT on, even those that are zero-rated. It doesn’t include sales that are exempt or outside the scope of VAT.