"Does a limited company have to be VAT registered?" is one of the most common questions new business owners ask. The answer depends on your turnover. Here is when you must register for VAT, when you might choose to, and how registering for VAT works.
The VAT registration threshold
You must register for VAT if:
- Your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period; or
- You expect to exceed £90,000 in the next 30 days alone.
The threshold is based on turnover, not profit, and it is a rolling 12-month test — not your accounting year. The deregistration threshold is £88,000.
Does a limited company have to be VAT registered?
There is nothing about being a limited company that forces VAT registration — sole traders and companies follow the same turnover threshold. A company below £90,000 does not have to register, and a sole trader above it does. The legal structure is irrelevant to the VAT test.
Why register voluntarily?
Many businesses register before they have to, because:
- They can reclaim VAT on purchases and start-up costs;
- Their customers are mostly VAT-registered businesses who can reclaim the VAT charged;
- It can make a small business look more established.
Voluntary registration rarely makes sense if you sell mainly to the public (consumers can't reclaim VAT), as it effectively raises your prices by 20% or squeezes your margin.
How to register for VAT
Most businesses register online through HMRC and receive a VAT number, then must:
- Charge VAT at the correct rate on sales;
- File VAT returns (usually quarterly) under Making Tax Digital using compatible software;
- Keep digital VAT records.
Choosing the right scheme — standard, Flat Rate, Cash Accounting or Annual Accounting — can make a real difference to your cash flow and admin.
How PushDigits can help
We handle VAT registration, advise on the best scheme, and run MTD-compliant returns so you never miss a deadline. See our VAT Returns service or book a consultation.