VAT for UK small businesses – Tax Tips & Advice for Business


Hi, I’m Graham from Inca Chartered Accountants. In this video I’m going to talk about how
you can make money from VAT. VAT is all about your sales. The threshold is £73,000. If you’re rolling 12 months sales exceeds
that limit you have to register for VAT. The key word in that is rolling. It doesn’t operate on 1 financial year to
the next basis. It operates on a rolling 12 months. Soon as you tip over, you have to register. What I’m interested in is registering early
on a voluntary basis. Before your sales get anywhere near £73000
a year. Why would you want to do that? Well it a lot of cases you can actually make
a lot of money from it. If you are selling to other businesses and
those businesses are VAT registered then your sales are no more expensive now than they
would be if you weren’t VAT registered. On the plus side expenses you incur running
the business suddenly become cheaper. There are lots of things you may buy which
have VAT on them. Mobile phone bills, internet, computer equipment,
desks and chairs, even dare I say Accountants bills. All of those things become cheaper if you
are VAT registered. Now that can save you around about a sixth
of the cost when you add that up over a quarter, over a year that’s quite a substantial saving
and that’s extra profit for you. Money that you don’t have to go and generate
in sales elsewhere. So when you are in a situation where you are
selling to other businesses think carefully about VAT registering nice and early would
benefit you and make you some money. Now there is another line to the VAT side. If you happen to be in professional services
you may not buy a lot, month on month for your business – a bit of mobile phone, a bit
of internet. There is a scheme called the flat rate scheme
and its particularly useful for biusinesses who are in professional services who don’t
have a lot of expenditure. Its also really easy to operate because you
are only looking at the VAT on your sales. You can forget about the purchases side. Its all about calculating VAT on your sales
and paying over a particular amount that is based on your profession. And that’s the important bit, its based upon
your profession. The rate you pay across is different from
one type of business to another. Getting the right type of business can make
you quite a bit of money ever quarter. We have clients who are making £600, £1000,
£2000 a quarter through nothing more than having the correct business type and being
on flat rate VAT scheme. That’s money directly into your pocket care
of HMRC. Flat rate VAT isn’t for everyone. If you are selling overseas it may not be
beneficial to you and if you are making losses it probably isn’t with sales particularly
low. So you need to think carefully about the ratio
of your purchases to your sales and then decide which scheme is best for you. So what is the next step? Well registering for VAT is relatively straight
forward. It can be done online or by your accountant. The important thing is record keeping. But then you probably know that about running
a business anyway. Keep your receipts whether you are on the
flat rate scheme or not, get VAT receipts, VAT invoices, keep a record of your income
and expenditure. And from that reporting your VAT should be
pretty straight forward. In the next video I’m going to talk about
how much tax you have to pay.

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10 thoughts on “VAT for UK small businesses – Tax Tips & Advice for Business

  1. It's not going to make you any money if your clients aren't happy to be paying VAT/VAT registered. Either you'll lose out on a customer, or you'll lose out on money from sales because you'll have to pay the VAT part of your sale to the tax man. Unless your expenses are high enough to reclaim all that money you lost from sales to VAT, you're in for a loss.
    VAT registration is not for everyone.

  2. i am currently running a business and i have reached the thresh hold of £85k so i need to register for VAT, my concern is as i am dropshipping from china ( the customers pay me for the product then i go and pay the supplier from china to ship the product to the customer) how do i go about paying VAT? as the supplier is the one shipping the products for me, i do not want to pay VAT on my orders as i will be left with no cash flow or even a loss because of the cost of FB ads etc.
    REPLY

  3. I am a self employed construction worker.
    Recently I got a phone call from a company called In-Sync telling me they can get me some money back through VAT if I sign up.

    Is it a good idea for me to register for VAT?
    My earnings are expected to be around £40.000 per annum.

  4. Hi there, thanks for the video. Recently my company has got dissolved. Please let me know if still I need to file VAT if any. Thanks

  5. ….. Ugh I burnt my bacon sandwich. Now I've got a REAL dilemma, do I bin it and make another or eat it and make another?

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