HMRC launches VAT registration estimator tool for small businesses

HM Revenue and Customs (HMRC) has launched a new online tool to help business owners work out the potential impact of registering for value added tax (VAT).

The government department said the VAT registration estimator was developed following feedback from founders who suggested that a service would be helpful to highlight when their turnover could require them 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 estimator tool, which HMRC says takes around 20 minutes to complete on first use, allows business owners to experiment with different inputs and outputs. It also provides links to further information about the VAT registration process.

Jonathan Athow, HMRC director general for customer strategy and tax design, said:

"We know that the majority of our customers want to get their tax right. 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."

Registering for VAT

Businesses must register for VAT if their total VAT taxable turnover for the previous 12 months exceeds the VAT threshold. This increased from £85,000 to £90,000 on 1 April, as announced in the former government's Spring Budget.

VAT registration is also required if a business owner expects their turnover to go over the threshold in the next 30 days, or they are an overseas business not based in the UK and supply goods or services to the UK.

Relevant resources

How to pay VAT – a guide for small business owners

Registering for VAT – should you do it and why?