I didn’t realise I went over the VAT threshold: Expert advice on your next steps

Realising you’ve unexpectedly crossed the VAT threshold can be a huge shock. However, it’s a common scenario for growing businesses. If you find yourself in this position, it’s crucial to address the situation promptly and effectively.

At Carston Chartered Accountants, we’re here to help you understand what this means for your business and guide you through the next steps.

What does going over the threshold mean?

As of April 2024, the VAT registration threshold in the UK is £90,000. This means if your turnover exceeds this amount over a 12-month rolling period, you must register for VAT with HMRC. It’s not just about the end-of-year figures; any consecutive 12-month period counts. So, if at any point your turnover for the past 12 months goes over this threshold, you need to take action.

It’s easy to miss this if you’re not regularly checking your turnover against the threshold, especially if your business experiences a sudden surge in sales or undertakes large, one-off projects.

What should you do if you went over the VAT threshold?

1. Register for VAT promptly
If you realise you’ve gone over the VAT threshold, you must register for VAT within 30 days of the end of the month during which you exceeded it. Failing to do so can result in penalties. We can assist you with the registration process, ensuring it’s straightforward and error-free.

2. Start charging VAT
Once registered, you’ll need to start charging VAT on taxable goods and services. This might require updating your pricing structures and informing your clients of these changes. We can help you understand how to communicate this to your clients effectively, ensuring they are clear about why and how the changes will affect them.

3. Keep meticulous records
From the moment you realise you need to register, it’s important to keep detailed records of all sales and purchases related to your business. This will not only be essential for completing your VAT returns but also for monitoring your business’s financial health. Our accounting services include helping you set up systems for efficient record-keeping.

4. Understand your VAT responsibilities
Being VAT registered means you’ll need to submit VAT returns, usually every quarter. It’s crucial to understand the types of expenses you can claim VAT on, and the various schemes available, such as the Flat Rate Scheme, which might benefit your business. We offer bespoke advice to ensure you’re on the most suitable scheme for your needs.

Common pitfalls and how to avoid them

Many businesses new to VAT registration encounter similar challenges. Here are a few pitfalls and how we can help you avoid them:

  • Underestimating the impact on cashflow: Charging VAT means the money you collect for VAT charges is not yours to keep—it must be passed on to HMRC. This can impact your cashflow if not planned properly. We can guide you in managing your finances to accommodate this change.
  • Failure to maintain proper records: Without proper record-keeping, you risk fines and penalties from HMRC. We can integrate easy-to-use accounting software into your business practices to streamline this process.
  • Neglecting to notify clients in advance: Clients appreciate transparency. Informing them as soon as you know about the VAT registration helps manage expectations and maintains good business relationships. We can provide templates and strategies for communicating these changes.

How we can help

Discovering that you went over the VAT threshold can initially seem daunting. However, with the right guidance, it’s a manageable and often positive step in your business’s growth. At Carston, our team is dedicated to providing the support and expertise you need to navigate this change smoothly.

We believe in making complex processes simple. By partnering with us, you gain not only a service provider but a team that’s invested in your business’s success. Let us handle the intricacies of VAT registration and management, so you can focus on what you do best—running your business.

If you have any questions about VAT registration or if you’re unsure about your current VAT status, please get in touch. We’re here to ensure that your transition is as seamless as possible, supporting you every step of the way.

Need assistance? Contact us today.