HMRC launches VAT registration estimator

HMRC launches VAT registration estimator

Jul 11, 2024

HMRC has launched a digital tool to help businesses estimate what registering for VAT means for them under the raised £90k threshold

The VAT Registration Estimator has been developed after feedback from small businesses suggested an online tool would be helpful to show when their turnover could require businesses to register for VAT and its effect on profits.

A VAT-registered business must charge VAT on eligible sales and can usually reclaim it on eligible purchases. There are around 300,000 new VAT registrations each year.

The VAT Registration Estimator is a guidance tool designed to help businesses decide if VAT registration is required and allows users to experiment with different inputs and outputs. It cannot provide bespoke business advice.

The estimator will be available 24/7 and should reduce calls to HMRC helplines for general enquiries about VAT by small businesses, all part of HMRC’s drive to a digital first approach to tax.

A business must register for VAT if:

•            their total VAT taxable turnover for the previous 12 months is more than the £90,000 VAT threshold – until 31 March 2024 this was £85,000;

•            they expect their turnover to go over the £90,000 VAT threshold in the next 30 days;

•            they are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

The estimator can help businesses to see what registering for VAT could mean, as well as linking to further information about the registration process. It is also a useful tool for businesses operating below the threshold and considering voluntary registration.

Jonathan Athow, HMRC director general for customer strategy and tax design, said: ‘We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.

‘The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives who tested the online tool and gave feedback before its launch.

‘We hope it will support businesses’ understanding of VAT registration, especially when combined with our guidance and other services.’

The new tool was tested by various stakeholders and businesses, including the Administrative Burdens Advisory Board (ABAB).

ABAB member Karen Thomson who was one of the testers, said: ‘I volunteered to be a tester for the new VAT tool. I am not a VAT expert so approached the experience as if I were a business with no knowledge of VAT.

‘Having made some comments, along with other stakeholders, I have now used the final tool and find it very useful. I like that when you are asked for information there are examples, links to guidance where appropriate and help on completing the boxes.

‘A lot of work has gone into this tool, and I believe stakeholder views have been considered, to ensure the customer has the best experience possible.’

How to use the VAT Registration Estimator

Before you start you will need information to hand about your business income and costs, and the VAT rates that apply to them.

•            Input whether the business is, or will be, based in the UK.

•            Input approximate business income and business costs for the time period to estimate, up to 12 months. The tool can also be used if you are setting up a new business.

•            Use the guidance links provided to choose the VAT rate(s) for your business income and costs – as an estimated percentage of zero, reduced or standard rated, or VAT exempt, goods and services.

•            Input if you would prefer to add VAT to, or absorb VAT into, your current or estimated selling price.

•            Check the answers and complete the form to review the results, which can be saved and printed.

The estimator is free to use, and it should take around 20 minutes to complete on first use.

The estimator is accessed through guidance pages, rather than the Government Gateway. HMRC will not record the details that are input.