You can choose to register for VAT if your turnover is under £90,000, and whether you should comes down to who your customers are. Registration lets you reclaim the VAT on what you buy and obliges you to charge it on what you sell. If your customers can reclaim what you charge, that trade is close to free money; if they cannot, you have just made yourself a fifth more expensive.
The customer decides it
Selling to VAT-registered businesses, the VAT you add costs your customer nothing because they reclaim it, while the VAT you reclaim on your own purchases is a real saving. Selling to consumers or to exempt businesses such as many in finance, insurance, health and education, the VAT you add is a genuine price rise you either pass on or absorb out of your margin. A business that is mostly zero-rated has the strongest case of all: it charges no VAT on its sales and reclaims it on its costs.
What it costs
Registration itself is free. The cost is the work: a return every quarter whether or not there is anything to declare, records kept digitally under Making Tax Digital, submission through compatible software, and the discipline of splitting every sale and purchase into net and VAT as it happens rather than at the end of the quarter. Voluntary registration is a permanent-feeling commitment: you can deregister once turnover falls below £88,000, but the quarterly obligation runs from the effective date until you do.
Compulsory, and the group variant
Compulsory registration is the same registration reached by the other route: turnover over £90,000 in the last twelve months, or expected to be in the next thirty days, and you have thirty days from the end of that month to register. Group registration is a separate idea again: companies under common control file one return between them and supplies inside the group fall out of VAT. It is applied for, not assumed, and it suits a group where one member cannot reclaim what a sibling charges it.
Questions people ask about voluntary registration for vat
Is voluntary VAT registration worth it?
It depends who buys from you. If your customers are VAT registered they reclaim what you charge and your own input tax becomes recoverable, so it usually pays. If you sell to consumers it is a price rise.
How much does it cost to register for VAT?
Registration is free. The real cost is quarterly returns, digital record keeping under Making Tax Digital, and compatible software to submit with.
What is a VAT group registration?
Companies under common control registering together and filing one return. Supplies between group members fall outside VAT, which helps when one member makes exempt supplies and cannot reclaim.