VAT

VAT for small businesses: when do you actually need to register?

18 March 2026 · 6 min read
VAT registration is one of those topics that sounds more complicated than it is. Here is the short version, and what actually changes for you once you are registered.

The registration threshold

You must register for VAT once your VAT-taxable turnover goes over the current threshold in any rolling 12-month period (not just your tax year) - or if you expect to go over it in the next 30 days alone. The exact figure changes periodically, so check gov.uk for the current threshold rather than relying on a number that may be out of date by the time you read this.

Voluntary registration below the threshold

You can register voluntarily even if you are well under the threshold. This makes sense for some businesses and not others:
  • Worth considering if most of your customers are VAT-registered businesses - they can reclaim the VAT you charge, so it costs them nothing extra
  • Worth considering if you buy a lot of VAT-able supplies or equipment, since you can reclaim VAT on business purchases once registered
  • Usually not worth it if most of your customers are the public or non-VAT-registered businesses, since your prices effectively rise by the VAT rate

What changes on your invoices

Once registered, every invoice needs your VAT registration number, the VAT rate applied, the VAT amount, and the total including VAT shown separately from the amount before VAT. This has to appear on every single invoice from your effective registration date onward - there is no grace period for old-format invoices.
This is exactly the switch Invoito is built to make painless: turn on VAT in Settings once, and every invoice from that point calculates and displays it correctly - no manual line-by-line recalculation.

Common mistake: forgetting the effective date

Your VAT registration has an effective date, and you are required to account for VAT on sales made from that date - even ones invoiced before your VAT number arrives. If this happens to you, HMRC guidance covers how to issue a VAT-only invoice retrospectively; it is a normal, well-documented situation.

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