Adding and removing VAT

Adding VAT: net × 1.2 gives the gross (VAT-inclusive) price at the standard 20% rate. Removing VAT: gross ÷ 1.2 gives the net price, and the difference is the VAT element. A common mistake is taking 20% off a gross figure to find the net — that under-counts, because the 20% was added to the smaller net number, not the larger gross one.

When you must register

You must register for VAT once your taxable turnover passes £90,000 in any rolling 12-month period, or if you expect to pass it in the next 30 days alone. You can also register voluntarily earlier — often worth it if your customers are VAT-registered businesses who reclaim the VAT you charge.

The VAT in your account was never yours Once registered, the VAT you charge belongs to HMRC. Move it into a separate pot the moment invoices are paid and the quarterly return becomes a non-event.

Choosing between standard, cash accounting and the Flat Rate Scheme changes your cashflow — we set clients up on whichever genuinely fits.