VAT is a crucial area of compliance for UK businesses, particularly with the expansion of Making Tax Digital.
VAT Registration Threshold
As of 2025, businesses with taxable turnover exceeding £85,000 must register for VAT. Even if you’re below the threshold, voluntary registration may benefit you by enabling input VAT claims.
Choosing the Right VAT Scheme
Several schemes are available, including:
- Standard Accounting: Submit VAT returns based on invoices received and issued.
- Cash Accounting: Pay VAT only when you receive payment.
- Flat Rate Scheme: Simplifies VAT for small businesses by applying a fixed rate.
Each has pros and cons. Seek advice to choose the best fit.
MTD for VAT in 2025
Making Tax Digital now applies to all VAT-registered businesses, regardless of turnover. Key requirements include:
- Keeping digital records
- Submitting returns using compatible software
- Maintaining digital links for all VAT-related data
Failure to comply can lead to significant penalties. Most cloud accounting platforms support MTD, making compliance straightforward.
VAT on International Sales
Post-Brexit, VAT on EU and non-EU trade has changed. If you sell goods or services internationally, understand:
- Import VAT and customs declarations
- VAT place-of-supply rules
- One Stop Shop (OSS) for EU digital services
