I didn’t realise I went over the vat threshold – What happens?

Understanding VAT Thresholds: What Happens If You Go Over £90,000?

Navigating VAT thresholds can be a daunting task for many business owners. With the current VAT threshold set at £90,000, it’s essential to be aware of your obligations and understand the steps you need to take if you exceed this limit. At GM Professional Accountants, we frequently encounter questions from clients who find themselves unexpectedly over the VAT threshold. Here’s a comprehensive guide to help you manage this situation effectively.

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What is the VAT Threshold?

The VAT threshold is the annual turnover limit set by HM Revenue and Customs (HMRC) which determines whether a business needs to register for VAT. As of 2024, this threshold stands at £90,000. This means if your business’s taxable turnover exceeds £90,000 in a 12-month period, you must register for VAT.

Why is it Important to Monitor Your Turnover?

Monitoring your turnover is crucial to ensure you remain compliant with HMRC regulations. Exceeding the VAT threshold without registering can result in penalties and interest on unpaid VAT. It’s vital to keep accurate records of your sales and be proactive in managing your accounts.

What Should You Do If You Go Over the VAT Threshold?

If you realize you’ve gone over the VAT threshold, you need to act quickly. Here are the steps you should follow:

  1. Register for VAT: You must register for VAT with HMRC within 30 days of exceeding the threshold. Failing to register on time can lead to penalties.
  2. Calculate and Pay VAT: From the date you are required to register, you must charge VAT on your sales and pay this to HMRC. You can reclaim VAT on your business purchases as well.
  3. Update Your Invoicing System: Ensure your invoices include VAT information and your VAT registration number.
  4. File VAT Returns: VAT returns must be submitted quarterly. The deadlines are typically one month and seven days after the end of each VAT period. For instance, if your VAT period ends on 31st March 2024, your return would be due by 7th May 2024.

Case Study: Managing VAT Registration

Let’s consider a case study to illustrate the importance of monitoring your VAT threshold. Jane runs a small boutique in London. In May 2023, her annual turnover was £85,000. Business picked up significantly in the summer, and by August 2023, her turnover had exceeded £90,000. Jane was unaware of the VAT threshold and didn’t register for VAT until October 2023. As a result, she faced penalties and had to pay backdated VAT. If Jane had monitored her turnover closely and registered on time, she could have avoided these issues.

How Can GM Professional Accountants Help?

At GM Professional Accountants, we specialise in helping businesses navigate complex tax regulations. Our expert accountants can assist you with:

  • Accurate Record Keeping: We help you maintain accurate financial records to monitor your turnover and ensure compliance with VAT regulations.
  • Timely VAT Registration: We guide you through the VAT registration process, ensuring you meet all HMRC deadlines.
  • VAT Return Filing: Our team manages your VAT returns, ensuring they are accurate and submitted on time, helping you avoid penalties.

Learn More About VAT

For more detailed information on VAT registration and compliance, visit the HMRC VAT Guide.

In conclusion, keeping a close eye on your turnover and understanding your VAT obligations is essential for any business. If you find yourself going over the VAT threshold, act quickly and seek professional advice to avoid unnecessary penalties. At GM Professional Accountants, we are here to support you every step of the way. Contact us today for expert advice and assistance with your VAT and accounting needs.

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