Key takeaways
- You can register for VAT at any time, even with turnover well below the £90,000 threshold, if you make or intend to make taxable supplies.
- It usually pays when your customers are VAT-registered businesses, because they reclaim the VAT you charge and you reclaim VAT on your costs.
- It usually costs when you sell to consumers, because you must either raise prices by 20% or absorb the VAT.
- Once registered you must file returns through Making Tax Digital software and follow all VAT rules.
- Businesses selling mainly zero-rated goods often register to receive regular VAT repayments.
You only have to register for VAT once your taxable turnover passes £90,000 in a rolling 12-month period. But nothing stops a smaller business registering voluntarily, and for some it is clearly worth doing. The answer depends almost entirely on who your customers are and how much VAT you pay on your own costs.
Who can register voluntarily
You can register if you make taxable supplies, meaning sales that are standard-rated, reduced-rated or zero-rated, or if you can show that you intend to make them. You cannot register if all your sales are exempt.
A business that has not started trading can register as an intending trader if it can show genuine plans to make taxable supplies, such as contracts, a business plan, premises or significant spending on set-up. This lets it reclaim VAT on start-up costs from the start.
Why businesses register voluntarily
Your customers can reclaim the VAT
If most of your customers are VAT-registered businesses, the VAT you add to your invoices costs them nothing in the end, because they reclaim it. Meanwhile you can reclaim the VAT on your own purchases, so your costs fall.
You have significant VAT on costs
Equipment, stock, materials, software, vehicles (other than cars) and premises can all carry VAT. Registering lets you recover it, including on some costs incurred before registration: goods you still hold that were bought in the last four years, and services from the last six months.
You sell zero-rated goods
A business selling zero-rated goods, such as most food, books or children’s clothing, charges no VAT but can reclaim VAT on its costs. Registered, it often receives a repayment every period.
Credibility and planning
Some businesses register because larger clients expect a VAT number, or because it avoids the risk of missing the threshold as the business grows. If you are close to £90,000 and growing, registering early means you set prices and systems up once, rather than changing them under time pressure.
Why voluntary registration can cost you
Consumer customers pay more
Consumers cannot reclaim VAT. If you sell to the public you must either add 20% to your prices, which may lose you customers, or keep prices the same and pay one-sixth of your takings to HMRC.
Administration and compliance
You must keep digital records, file returns through Making Tax Digital compatible software, meet deadlines and follow VAT rules on invoices and rates. Late returns and payments bring penalties.
Low costs mean little to reclaim
Many service businesses, such as consultants, coaches and designers, have few costs carrying VAT. The benefit of reclaiming is small, and if they sell to consumers the extra VAT is a pure cost.
Worked examples
A consultant selling to businesses
A marketing consultant invoices £60,000 a year, all to VAT-registered companies, and spends £9,000 a year on software, equipment and travel, of which £1,500 is VAT.
| Not registered | Registered | |
|---|---|---|
| Income kept | £60,000 | £60,000 (clients pay £72,000 and reclaim £12,000) |
| Costs | £9,000 | £7,500 (VAT of £1,500 reclaimed) |
| Profit before tax | £51,000 | £52,500 |
Registration is worth £1,500 a year, less the time spent on returns. The clients pay the same net amount either way.
A hairdresser selling to the public
A hairdresser takes £70,000 a year from consumers and spends £8,000 on products and equipment, including £1,300 VAT.
| Not registered | Registered, prices unchanged | |
|---|---|---|
| Income kept | £70,000 | £58,333 (one-sixth of £70,000 paid as VAT) |
| Costs | £8,000 | £6,700 (VAT reclaimed) |
| Profit before tax | £62,000 | £51,633 |
Registering voluntarily would cost more than £10,000 a year unless prices rose, so it makes no sense here. The Flat Rate Scheme would reduce the cost but not remove it.
How to register
Register online through HMRC. You need your business details, bank details, turnover estimates and, for a company, its registration number. You choose your effective date of registration, which can be backdated in some cases to recover VAT on earlier costs. HMRC usually issues your VAT number within about 30 working days. Until it arrives you cannot show VAT on invoices, but you still owe VAT from your registration date, so allow for it in your prices and reissue invoices showing VAT once you have the number.
Consider at the same time whether a VAT scheme suits you, such as the Flat Rate Scheme, Cash Accounting or Annual Accounting. Our main VAT registration guide covers the process step by step.
Changing your mind
If you register voluntarily and later find it does not suit you, you can apply to cancel the registration if your taxable turnover in the next 12 months is expected to be £88,000 or less. The final return may include VAT on stock and assets you still hold.
Frequently asked questions
Can I register for VAT if my turnover is below £90,000?
Yes. Any business making or intending to make taxable supplies can register voluntarily, whatever its turnover.
Is voluntary VAT registration worth it for a sole trader?
It can be, if most customers are VAT-registered businesses or you have significant VAT on costs. It is rarely worth it if you sell mainly to consumers and have few VAT-bearing costs.
Can I reclaim VAT on costs from before I registered?
Yes, within limits: goods bought in the four years before registration that you still hold and use in the business, and services bought in the six months before registration.
Can I register for VAT before I start trading?
Yes, as an intending trader, if you can show genuine plans to make taxable supplies.
Does voluntary registration mean I must use Making Tax Digital?
Yes. Every VAT-registered business must keep digital records and file through compatible software, however small.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.