Registering for VAT - Employed and Sole Trader

[Veloci10]

Hi All,

I’m currently employed, earning ~£55k. I also run a side business as a sole trader, which has picked up in the last 12-24 months.

What I would like some help to understand is at what point would I need to register for VAT? I see the current threshold is £85k; but is that purely from the side business or would my employed wages come into play too, so once the side business hits ~£30k?

Any help much appreciated, thanks a lot.

 

[Newchodge]

Hi All,

I’m currently employed, earning ~£55k. I also run a side business as a sole trader, which has picked up in the last 12-24 months.

What I would like some help to understand is at what point would I need to register for VAT? I see the current threshold is £85k; but is that purely from the side business or would my employed wages come into play too, so once the side business hits ~£30k?

Any help much appreciated, thanks a lot.

The VAT threshold relates only to turnover of the business. Wages are completely irrelevant.

 

[Argentum Tax]

What I would like some help to understand is at what point would I need to register for VAT? I see the current threshold is £85k; but is that purely from the side business or would my employed wages come into play too, so once the side business hits ~£30k?

It is important to appreciate that the £85k VAT threshold is based on the turnover of your business, NOT net profits. Once your business turnover hits £85k over a rolling 12 month period you need to register.

As Cyndy says, your wages are totally outside the scope of VAT turnover.

 

[Veloci10]

Thanks for the replies, very much appreciated.

The turnover of the business is a long way off that at the moment, I just wanted to be prepared if needed so thank you for the clarification.

 

[WaveJumper]

And I think its good to be thinking about it now, ie if you hit the threshold and then required to add VAT to your prices how would this effect you competing the the comp, and of course there's the other side of the coin I assume the current level of your expenditure doesn't warrant you being VAT registered to claim it back

Always good to be think ahead

 

[Veloci10]

And I think its good to be thinking about it now, ie if you hit the threshold and then required to add VAT to your prices how would this effect you competing the the comp, and of course there's the other side of the coin I assume the current level of your expenditure doesn't warrant you being VAT registered to claim it back

Always good to be think ahead

Thank you - There is little expenditure in the business as it’s a digital/design type service. The only thing I have considered is registering as a Ltd company as I believe this would save me in the region of 20% in tax due to just hitting the 40% income tax threshold in my main employment... I should likely look into that some more.

 

[MyAccountantOnline]

Thank you - There is little expenditure in the business as it’s a digital/design type service. The only thing I have considered is registering as a Ltd company as I believe this would save me in the region of 20% in tax due to just hitting the 40% income tax threshold in my main employment... I should likely look into that some more.

Definitely worth considering. I have quite a few clients who have done just that for the same reason.

Something else to conder - if you are providing services to VAT registered businesses you may benefit from a voluntary VAT registration.

 

[JEREMY HAWKE]

Definitely worth considering. I have quite a few clients who have done just that for the same reason.

Something else to conder - if you are providing services to VAT registered businesses you may benefit from a voluntary VAT registration.

This is important this situation is misunderstood by many on here there is an example of a thread running at the moment where some don't get it
I am in an industry where all small operators are vat registered because all their customers are registered and there are a lot of costs involved

 

[matlob]

Also take a look into flat vat rate schemes. You may benefit financially from that too, especially if you are not buying lots of stuff and just supplying a service.

I would go limited and that way you can control your earnings and keep under the 40% zone.

 

[MyAccountantOnline]

Also take a look into flat vat rate schemes. You may benefit financially from that too, especially if you are not buying lots of stuff and just supplying a service.

I would go limited and that way you can control your earnings and keep under the 40% zone.

It is an option, but for businesses with low costs it's rarely beneficial now as they generally have to use the limited cost trader flat rate percentage.