How to sail through the VAT threshold

How do you feel about the VAT threshold? I know many people are terrified of going over the VAT threshold in the UK, but it isn’t something that should scare you; it’s something that’s good for your business!

That’s why I want to talk to you about sailing over the VAT threshold without the fear, worry and self-sabotage that can go with it, so you can enjoy the growth of your business instead of worrying about whether you're going to go over the VAT threshold or not.

Because that VAT threshold isn't something to be scared of, and yet, it stops people from growing and reaching their potential. So let’s cover the basics, so you can drop the fear and overwhelm and sail through that VAT threshold instead.

The VAT threshold in the UK

In the UK, the VAT threshold is currently set at £85,000. That’s £85k worth of revenue and is done on a rolling 12-month basis. So it's not relevant to the calendar year or your year-end. You need to know when you’re getting towards the VAT threshold, so you can register when required.

My advice would be to start looking at your revenue six months out and asking yourself, ‘Am I going to be hitting that threshold in the next six months?’ It’s essential to do that because otherwise, it suddenly hits you, and you’re then into panic mode about increasing your prices by 20%. 

Know your clients and your prices

Start by thinking about your clients and how your going VAT registered will affect them. Are they VAT registered? If you’re working business-to-business (B2B), for example, there’s a good chance that if you put VAT on everything, nobody cares. You can just put up your prices and let clients know they will have VAT added on.

If you're selling to small businesses or consumers, putting your prices up by 20% is a huge deal. If you’re in this situation, I recommend considering putting your prices up by 10% six months before that threshold limit. You can then put them up by another 10% later, which gives you a bit of a buffer where you're not paying VAT to be able to do that. 

Think about your supplies too

What about your supplies? What are you buying? If you’re buying a big coaching programme, for example, it will almost certainly have VAT on it. So you can claim back that VAT if you’re VAT registered. 

Also, consider whether you will be a flat rate or a standard person. This is something you can ask your accountant to confirm what's best for you and if what you offer is even ratable - because it might be that you’re exempt from being vatable.

For many, the VAT threshold isn’t the real issue

All the technical stuff is important, and you need to know what you're doing, but it isn’t the real issue for many. I’ve found over time that the biggest problem with the VAT threshold is the fear and worry about it. It’s the uncertainty and worry every month, especially if you’re not sure if you’re close to that threshold yet. And often, there’s the relief in knowing you’ve just kept under it.

It’s that kind of almost self-sabotage, where you’re holding back the growth of your business, as you fear going over that threshold as it feels like a total pain in the neck. 

Embracing growth and the VAT threshold

I want you to stop worrying about the VAT threshold. Once you get to the £70k bracket, start thinking about the implications of becoming VAT registered and don’t let your worries and fears hold you back.

But if you're at the 85k bracket in your business, you should be a Limited Company and have an accountant and a bookkeeper. Because honestly, once you get into it, VAT is fine. 

Getting somebody to do your VAT for you is an increased cost. And I recommend you contact your accountant or bookkeeper to do it if they're qualified. But make sure they’re clear about what you need and what services you’re offering. Because there are VAT issues on digital services and also if you're selling outside of the UK, so make sure your accountant understands about VAT in those situations. 

But if I had one key takeaway from this blog, it would be not to let tax hold your business back. Let your business drive the situation, and be pleased you're paying more tax.  - because it is an excellent thing for your business.

And if you’re earning more than £70k a year, are nearing the £85k VAT threshold, or have already gone over it and haven't been able to put your prices up or are struggling, then join me at my ‘Sailing Over The VAT Threshold’ masterclass on Tuesday 20th September. This one-hour class will cover the key things you need to know before getting VAT registered and what to do with your pricing once you’re over the threshold. You can find more details at:


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