As your business turnover grows, VAT comes into the picture. When do you have to register? And once you have, can you get back the VAT you pay on purchases?
VAT rates
Rate
Applies to
20% (standard)
Most goods and services
5% (reduced)
Some goods and services, such as children's car seats and home energy
0% (zero)
For example most food and children's clothes
Some things are exempt from VAT, such as postage stamps and financial and property transactions. Exempt isn't the same as zero-rated: you can't reclaim VAT on purchases used for exempt supplies.
When you must register
The threshold is £90,000. There are two tests:
Looking back: if your taxable turnover for the last 12 months goes over £90,000, register within 30 days of the end of the month it went over. You're registered from the first day of the second month after you went over.
Looking ahead: if you expect turnover to go over £90,000 in the next 30 days alone, register by the end of that 30-day period. You're registered from the date you realised.
You can also register voluntarily if your turnover is below £90,000.
If you register late, you have to pay the VAT you owe from the date you should have been registered, and you may get a penalty.
Once you're registered
Returns: you usually send a VAT Return every 3 months. The deadline is usually 1 calendar month and 7 days after the end of the accounting period.
Software: under Making Tax Digital for VAT, VAT-registered businesses must keep digital records and send returns using software, unless HMRC agrees this isn't practical for them.
Can you reclaim the VAT you pay?
VAT-registered businesses can reclaim VAT on business purchases through their VAT Return.
You can reclaim:
VAT on goods and services used for your business
for things you also use personally, only the business part, and you must keep records showing how you worked out the split
You can't reclaim:
anything only for personal use
the cost of entertaining or providing hospitality to people you do business with
cars used for both business and personal journeys (see "Readers ask" below)
goods and services you use to make VAT-exempt supplies
You must have: valid VAT invoices, and records to support your claim. Missing valid invoices, or not being able to show the business purpose, are common reasons for a claim being refused.
Purchases before you registered
You can also reclaim VAT on purchases made before you registered, if they relate to your taxable business:
Goods: bought in the last 4 years, and you still have them or used them to make goods you still have
Services: bought in the last 6 months
Readers ask: can I reclaim VAT on a car bought with company money?
It depends on the vehicle and how it's used.
A new car or commercial vehicle used only for business: you might be able to reclaim all the VAT. You need to show there's no personal use, for example by stating it in an employee's contract. Travel between home and work counts as personal use, unless it's to a temporary workplace.
A car mainly used as a taxi, for driving instruction or for self-drive hire: you might also be able to reclaim all the VAT.
A car used for both business and personal journeys: you usually can't reclaim the VAT on buying it.
A used car: the sales invoice must show the VAT.
Hiring a car: if it replaces a company car that's off the road, you can usually reclaim 50% of the VAT on the hire charge. If it's for business use only and for no more than 10 days, you can reclaim all of it.
Repairs, maintenance and parking: you can usually reclaim VAT on business-related running costs.
Fuel: for mixed use, either reclaim all the VAT and pay the fuel scale charge for your vehicle, or reclaim only the VAT on business trips and keep detailed mileage records.
Sources checked: 1 October 2026 · Tax year: 2026 to 2027 · Sources are official GOV.UK pages.
This is general information, not tax advice for your situation. How it applies depends on your full circumstances.