As a sole trader, managing your tax obligations can be difficult. VAT is a particularly complex issue and there may be circumstances in which sole traders need to register. At the same time, there are circumstances in which you may choose to be VAT registered, although you may not need to.
At Hanley & Co. Accountants, this month’s blog looks at whether a sole trader needs to register for VAT. For more information, call us in Staveley, near Kendal on 01539 821869.
When do I Have to Register for VAT?
Your business is often legally required to register for VAT when its taxable turnover exceeds the threshold. If your turnover in any 12-month time period is over £90,000, you must register. You must also register for VAT if you think you will go over the registration threshold within the next 30 days of trading.
Some businesses may decide to voluntarily register for VAT before reaching the threshold as it is more tax efficient for them.
Do I Need to Charge VAT?
Once a sole trader is registered for VAT, you are required to charge it on most goods and services. It is important you work out with rates of VAT apply to the products and services you sell.
This information will need to be on your customer’s invoice and your accounting record, so you can submit your VAT return.
There are three different rates of VAT:
VAT Standard Rate: The standard rate for VAT is 20%. This applies to most goods and services sold once you become registered.
VAT Reduced Rate: Some goods fall into the reduced category of 5%.
VAT Zero-Rate: Some goods are subject to VAT, but at 0%. Although they have a 0% charge, you still need to record these in your VAT accounts and submit them to HMRC in your VAT return.
Once VAT registered, self-employment businesses will need to charge VAT and submit regular and accurate returns. As many sole-traders manage their business and accounting on their own, it can be stressful.
VAT compliance can be complex, which means many sole traders may be satisfied to simply meet their tax obligations.
Contact Hanley & Co. Accountants
If you require accounting advice, contact Hanley & Co. Accountants in Staveley, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
