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When you have to register

UK VAT registration is mandatory in two scenarios for 2025/26:

  1. Your taxable turnover exceeds £90,000 in any rolling 12-month period. Not your tax year, any 12 months. Check monthly.
  2. You expect taxable turnover to exceed £90,000 in just the next 30 days alone. (Big order incoming, viral product launch, etc.)

You can also register voluntarily below the threshold. Voluntary registration usually makes sense when (a) your customers are mostly other VAT-registered businesses, (b) you import a lot of stock (so you can reclaim import VAT via PVA), or (c) you're approaching the threshold and want to control the switch.

If you cross the threshold and don't register within 30 days, HMRC backdates registration and you owe VAT on every sale since, even though you didn't charge it to customers. Penalties can be up to 100% of unpaid VAT. Track your rolling 12-month turnover monthly to avoid this.

Step 1: Decide your effective date of registration

Your effective date of registration is the date from which you must charge VAT on sales. The rules:

Most ecommerce sellers picking voluntary registration choose the start of a calendar month for clean reporting.

Step 2: Apply for VAT online at HMRC

Apply through your Government Gateway account at gov.uk/register-for-vat. You'll need:

The application typically takes 20-40 minutes if you have the documents ready. Submit online; you'll get a reference number and HMRC will respond within 10-30 working days.

Step 3: Pick a VAT scheme

UK VAT-registered businesses default to Standard VAT (quarterly returns, full input/output VAT tracking). For ecommerce sellers, there are two alternatives to consider:

Standard VAT (the default)

Charge 20% (or appropriate rate) on sales. Reclaim VAT on costs (imports, fees, software, etc.). Pay the net difference to HMRC quarterly. This is the right choice for almost all ecommerce sellers.

Flat Rate Scheme (FRS), usually NOT for ecommerce

Pay a fixed percentage of gross turnover to HMRC (7.5%-9.5% for retailers depending on sector). You keep the difference between what you charged customers (20%) and what you pay HMRC. Catch: you can't reclaim input VAT except on capital purchases over £2,000.

For ecommerce sellers with significant import VAT, marketplace fees, software costs, and freight, input VAT recovery is usually worth more than the FRS savings. Skip FRS unless an accountant specifically recommends it.

Annual Accounting Scheme

One VAT return per year (instead of four), with monthly or quarterly interim payments. Useful for cash-flow predictability. Available if turnover is under £1.35M. Doesn't change the amount of VAT, only the filing frequency.

Step 4: Wait for your VAT number (10-30 working days)

HMRC takes 10-30 working days to issue a VAT number. During this time:

Once your VAT number arrives, retrospectively add it to all invoices you issued during the wait. Your VAT return software (Xero, QBO, FreeAgent) will handle this automatically once you enter the number.

Step 5: Set up MTD-compatible software

Making Tax Digital for VAT requires all VAT-registered businesses to submit returns through software with a direct API link to HMRC. Compatible options:

Spreadsheet-only VAT returns are no longer permitted. You either use full accounting software or a bridging tool that lifts data from spreadsheets into MTD-compliant submissions.

For ecommerce sellers, pair your accounting software with A2X or Link My Books to handle marketplace payout reconciliation properly. Without a bridge, ecommerce VAT reconciliation is a manual nightmare.

Step 6: Update marketplace and platform settings

Once your VAT number arrives, update settings on every platform:

For UK-stock UK-seller marketplace scenarios, you're VAT-responsible (the marketplace just processes the payment). For overseas-stock or non-UK-seller scenarios, the marketplace handles VAT. See marketplace VAT guide for the full breakdown.