A Complete Guide to VAT Registration in 2025 for Small Businesses and Freelancers 

A Complete Guide to VAT Registration in 2025 for Small Businesses and Freelancers 

Thinking about registering for VAT? Whether you're a growing business approaching the £90,000 threshold or considering voluntary registration, understanding VAT doesn't have to be complicated. This guide breaks down everything you need to know about VAT - from what it is and when you need to register, to how to handle your first VAT return.

What is VAT?

Value Added Tax (VAT) is a consumption tax added to most goods and services sold in the UK. It’s ultimately paid by consumers, but is collected and remitted to HMRC by businesses. The standard VAT rate is currently 20%, with reduced rates of 5% and 0% applying to certain goods and services. 

For businesses, VAT applies not only to products sold but also to services offered. If you’re VAT-registered, you’ll charge VAT on your sales and can reclaim VAT paid on your purchases .

What is the current VAT registration threshold?

The VAT registration threshold for 2025 is £90,000, up from £85,000 since April 2024.  This means you need to register for VAT if your business’s annual taxable turnover exceeds (or probably will exceed) £90,000 in a year, or you expect your taxable turnover to go over £90,000 in the next 30 days. 

It’s important to know that the VAT threshold is calculated over any 12-month period, not just your tax or accounting year. This means you always need to check your turnover for the last 12 months (e.g., from January to December, or February to January) to see if you’ve gone over the £90,000 threshold. It doesn’t reset at the start of a new tax year, so you need to keep an eye on it all the time.

Does the VAT threshold increase every year? 

Historically, the VAT threshold has risen in the budget in line with inflation, but not always – it remained at the same rate from 2017 to 2024 .  

What is my taxable turnover, and how do I calculate it? 

Your taxable turnover is the total value of everything you sell or supply that isn’t VAT exempt.  Taxable sales include those that fall under:

• Standard rate (20%)
• Reduced rate (5%)
• Zero rate (0%) 

It’s worth noting, though, that there are some goods and services on which VAT isn’t charged. For example, fundraising events by charities, and education and training. You can learn more about this here.

I’m a sole trader. Does that make any difference to how much VAT I pay?

Whether or not you have to pay VAT doesn’t depend on your business structure, just your 12-month turnover. This means that whether you’re a sole trader, a partnership or a limited company, you’ll still need to pay VAT if you exceed the threshold. 

Can I register for VAT if my turnover is below the threshold?

Yes, you can register for VAT voluntarily. You might consider doing this for a few reasons, including:

• You have high business expenses you can reclaim VAT on
• You want to establish greater credibility, and most of your customers are VAT registered, so they can recover the VAT from your costs
• You’ll avoid the risk of unknowingly going over the threshold and incurring penalties.

Read more: A Complete Guide to the Flat Rate VAT Scheme for Small Businesses

How do I register for VAT, and what information do I need? 

How you register for VAT depends on your business structure – you’ll need to provide different information depending on whether you’re a limited company compared to if you’re a sole trader or partnership. 

To register as a limited company you’ll need: 

• Your company registration number
• Your business’s bank account details
• Your Unique Taxpayer Reference (UTR)
• Details of your annual turnover

You’ll also need information about:

• Your Self Assessment
• Your Corporation Tax
• Pay As You Earn (PAYE)

Read more: The Essential Guide to Self Assessment

If you’re registering as an individual or a partnership, you'll need:

• Your National Insurance number
• An identity document, like a passport or driving licence
• Your bank account details
• Your Unique Taxpayer Reference (UTR), if you have one
• Details of your annual turnover
  
  

You’ll also need information about:

• Your Self Assessment tax return
• Payslips (if applicable)
• P60 

Now, let’s get into how to register!

 Registering online

1. Setup a government gateway account. If you’ve ever submitted a Self Assessment tax return, you’ll already have one of these.
2. Head to this page to sign in.
3. Navigate to the heading “Get another tax, duty or scheme” and button, select VAT from the options and then follow the steps in the portal. 
4. Wait for your VAT certificate, which you should receive within 30 days. 

Registering by post

If you can’t register online, you can register using the paper form ‘VAT1 Application for registration’. There are also some circumstances in which you might be required to register by post, which you can learn more about here. 

1. Contact HMRC using the helpline number on the VAT: general enquiries page to request a paper form VAT1 Application for registration.
2. An adviser will ask questions to confirm your reasons for requesting a paper form. If your reason for requiring a paper form is accepted, one will be sent out to you. If not, you’ll be directed to the digital service.
3. Complete the paper form when it arrives.
4. Print out and complete any necessary forms mentioned in the additional forms section of this page.
5. Send the completed forms to HMRC using the postal address shown on the form. 

What’s a VAT number, and when do I get one?

Your VAT number is your unique ID provided by HMRC when you register for VAT. In the UK, VAT numbers are nine digits long and always contain the prefix ‘GB’.  Once you’ve registered for VAT, you’ll find this number on your VAT registration certificate. This number is important, as it will need to be included on your future invoices.   

What do I do about charging VAT before I get my VAT registration number?

HMRC states that you can’t include VAT on your invoices before your certificate arrives, so you should instead increase your prices to reflect the amount you’ll need to pay, and explain this to your customer or client. After you get your registration number, you should reissue the invoice reflecting the amount of VAT charged. Of course, your customer doesn’t’ need to make any extra payment, but they can now reclaim the additional money from HMRC on their next VAT return. 

What if I go over the VAT threshold temporarily?

If your business goes over the VAT threshold temporarily, you may not need to register for VAT if you can prove to HMRC that your taxable turnover will drop back below the threshold in the next 12 months.

You’ll need to contact HMRC to request the VAT1 registration form. Then, you’ll have to provide evidence showing why you believe your taxable turnover will not go over the deregistration threshold of £88,000 in the next 12 months.

HMRC will consider your exception and write to confirm if you get one. If not, they’ll register you for VAT.