The thresholds for VAT registration and deregistration have remained static for the last 7 years, however an increase in the thresholds was announced in the Spring Budget.
The new registration threshold is now £90,000, increased from £85,000. The deregistration threshold has also increased to £88,000 (from £83,000).
VAT registration becomes compulsory if by the end of any month, your business’s VAT taxable turnover for the previous 12 months goes above the threshold. This needs to be looked at on a rolling monthly basis, and not just at your accounting year end.
It is possible to apply for a registration ‘exception’ if you believe that you are only temporarily going above the threshold, for instance, because of winning a large one-off project. Provided you can show evidence as to why your turnover will be below the deregistration threshold in the next 12 months then HM Revenue and Customs are willing to consider making an exception.
In view of the rate of inflation since the thresholds were last revised, the latest increase seems to be a token gesture. However, it may help you to stay out of VAT and the administrative work that it brings with it.
For many sole traders and small business owners, reviewing their accounting system only happens when something forces the issue. For instance, many sole traders are currently looking at whether their accounting system meets the requirements for Making Tax Digital for Income Tax.
UK inflation eased to 3.6% in the year to October, down from 3.8% in September, according to the latest figures from the Office for National Statistics (ONS).