When do I have to register for VAT?

You must register if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the threshold increased from £85,000 to £90,000 on 1 April 2024). You must also register if you expect to exceed the threshold in the next 30 days, even if your past 12 months were below it. Below £90,000 you can register voluntarily; this lets you reclaim VAT on business purchases (input tax). The deregistration threshold is £88,000, so if your turnover drops back below that you can apply to deregister.

What VAT rates apply in the UK?

Three positive rates, plus a couple of categories that sit outside them. The standard rate is 20%, which covers most goods and services. The reduced rate is 5%, covering domestic fuel and power, children's car seats, certain energy-saving materials, mobility aids for older people, and a few other narrowly defined categories. The zero rate is 0% and applies to most food, books and newspapers, children's clothing and footwear, public transport, prescription drugs, women's sanitary products (zero-rated since 1 January 2021), and most exports. Exempt supplies and supplies outside the scope are separate categories: they carry no VAT and don't allow input-tax recovery on related expenses.

What does HMRC require on a VAT invoice?

Per VAT Notice 700/21, a full VAT invoice must include: a unique sequential invoice number, the time of supply (tax point), the date of issue if different, the supplier's name, address, and VAT registration number, the customer's name and address, a description sufficient to identify the supply, for each line the quantity, the rate excluding VAT, and the VAT rate applied, the total excluding VAT, the rate of any cash discount offered, the total VAT payable in sterling, and the total amount payable. For sales below £250 (gross), a simplified invoice is allowed, with reduced fields. For B2C, you generally don't need to issue a VAT invoice unless asked, but the receipt should still show your VAT number and the VAT amount.

What is the reverse charge?

The reverse charge shifts the obligation to account for VAT from the supplier to the customer. It applies in two main UK scenarios: (1) most B2B services bought from suppliers outside the UK by UK VAT-registered businesses: the customer self-accounts for VAT under place-of-supply rules; (2) the domestic reverse charge for building and construction services, in effect since 1 March 2021, where VAT-registered subcontractors don't charge VAT on supplies to other VAT-registered contractors in the chain, the contractor accounts for the VAT instead. When the reverse charge applies, your invoice must clearly state 'Reverse charge, customer to account for VAT to HMRC.'

What is Making Tax Digital and does it apply to me?

Making Tax Digital (MTD) for VAT requires every VAT-registered business (regardless of turnover, as of April 2022) to keep digital VAT records and submit VAT returns through HMRC-compatible software, not the old online portal. You need software that can generate VAT returns from your digital records and submit them via HMRC's API. Most modern accounting software (Xero, QuickBooks, Sage, FreeAgent) is MTD-compatible. If you're using spreadsheets, you need 'bridging software' that connects them to HMRC. Penalties apply for non-compliance.

What's the difference between zero-rated and exempt?

Zero-rated supplies are taxable supplies at a 0% VAT rate; you charge no VAT to the customer, but you can recover the input VAT on related purchases. Exempt supplies are entirely outside the VAT system; you charge no VAT and you cannot recover input VAT on related purchases. Examples of zero-rated: most food, books, children's clothing, exports. Examples of exempt: insurance, finance and credit, education, health services, residential rents, and most postal services. If you make a mix of taxable and exempt supplies, you'll need to apportion your input tax, known as partial exemption.

VAT on UK Invoices: HMRC Requirements (2026)

Jul 6, 202610 min read

TIT

The Issueable Team

Small business operations

How VAT works on UK invoices: the £90,000 registration threshold, the mandatory fields HMRC requires on a VAT invoice, the reverse charge, and what Making Tax Digital actually means for your invoicing workflow.

How UK VAT works in one paragraph

VAT (Value Added Tax) is a consumption tax that applies at every stage of a UK supply chain. Each VAT-registered business charges VAT on its sales (output tax) and reclaims VAT on its business purchases (input tax). The net amount — output minus input — is what you pay to HMRC each VAT period. The standard rate is 20%, with a reduced rate of 5% and a zero rate of 0% applying to specific categories. The system is administered by HM Revenue and Customs under the Value Added Tax Act 1994 and a stack of related regulations.

The rest of this covers when to register, what every UK invoice has to contain, and the edge cases (reverse charge, zero-rated exports, partial exemption) that catch most small businesses out.

When you have to register

You must register for VAT if either:

Your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. This is "rolling": at the end of every month, look back at the previous 12 months. The threshold rose from £85,000 to £90,000 effective 1 April 2024, the first increase in seven years.
You expect to exceed £90,000 in the next 30 days alone (e.g., a single large contract that crosses the threshold).

Once you cross, you must register within 30 days of the end of the month in which you went over. Your effective date of registration is the first day of the second month after you crossed (so, over the threshold in July means charging VAT from 1 September). The penalty for late registration is a percentage of the VAT due, scaling with how late.

VAT-taxable turnover means your total sales of taxable goods and services, including zero-rated supplies, but excluding VAT-exempt supplies and supplies outside the scope of UK VAT.

You can also register voluntarily below the threshold. The trade-off:

You can reclaim input VAT on business purchases — meaningful if you have material business expenses.
A VAT number signals to B2B clients that you're running a real business.
On the other side: you must charge VAT on all taxable sales, which raises prices for non-VAT-registered customers (most consumers and very small B2B clients).
And you take on quarterly filing obligations under MTD, with required software.

The current rate structure

Rate	Applies to (illustrative)
20% standard	Most goods and services: professional services, retail, hospitality, software (when supplied to UK customers), construction (in most cases), online subscriptions to UK consumers
5% reduced	Domestic fuel and power, certain energy-saving materials, mobility aids for older people, children's car seats, smoking-cessation products
0% zero-rated	Most food (but not catering or restaurant meals), books and newspapers (including digital editions since 2020), children's clothing and footwear, public transport, prescription drugs, women's sanitary products (zero-rated since 2021), most exports
Exempt	Insurance, finance and credit, education and training, health services provided by registered professionals, burial and cremation, postal services, certain types of land and property
Outside the scope	Wages, MOT certificates, tolls, statutory fees, and anything not done in the course of business

The line between zero-rated and exempt matters for input tax. Both result in no VAT on the sale, but only zero-rated supplies preserve your right to recover input VAT on related expenses. A bookseller (zero-rated) can reclaim input VAT; a private healthcare provider (exempt) cannot.

What every UK invoice has to include

VAT Notice 700/21 sets the field-level requirements. The exact required content depends on the invoice value and the nature of the customer.

Full VAT invoice (the default for B2B)

For supplies of any value to a VAT-registered business customer, a full VAT invoice is required. It must show:

A unique sequential invoice number. The number sequence must be continuous — gaps trigger HMRC questions. If you void an invoice, retain the number and issue the corrected one with a new number.
Date of issue of the invoice.
Tax point (time of supply). Usually the same as the issue date, but can differ: a deposit, for example, creates an earlier tax point. Show both if they differ.
Supplier name and address.
Supplier's VAT registration number.
Customer name and address.
Description of the goods or services sufficient to identify them. "Consultancy" is too vague; "Brand strategy workshop, May 14, 4 hours" is not.
For each line item: quantity, unit price excluding VAT, VAT rate, and total excluding VAT.
Total amount excluding VAT (the subtotal).
Rate of any cash discount offered.
Total VAT payable, expressed in sterling, even if the underlying transaction is in another currency.
Total amount payable, including VAT.

A typical UK B2B VAT invoice for a £2,000 service to a London customer:

Invoice INV-2026-187
Issue date: 16 July 2026 · Due: 30 days

Studio Lumen Ltd, 45 King St, Manchester M2 4LQ
VAT registration: GB 123 4567 89

Bill to: Acme Trading Ltd, 100 Cheapside, London EC2V 6DT

Brand strategy workshop, 14 May 2026, 4 hours    £2,000.00
                                  Subtotal       £2,000.00

VAT (20%)                                          400.00

                                  Total          £2,400.00
                                  Of which VAT     400.00

Simplified invoice (B2C and small B2B)

For a supply with a gross value of £250 or less, you may issue a simplified invoice with reduced fields:

Supplier name and address
Supplier's VAT number
Tax point
Description of goods or services
For each different VAT rate applicable: total amount payable including VAT and the VAT rate

The simplified invoice is common for retail, food service, and consumer-direct online sales.

Modified invoice (cash receipt with VAT-inclusive prices)

You may issue a modified invoice (with VAT-inclusive line totals plus the VAT shown for each rate) for B2B sales over £250, but only with the customer's agreement.

The reverse charge: when not to charge VAT

Two reverse-charge scenarios catch most UK businesses out. Neither is especially complicated once you know it applies.

1. Cross-border B2B services. When a UK VAT-registered business supplies most services to a business customer outside the UK, the supply is generally outside the scope of UK VAT, and the customer accounts for VAT in their country under their local reverse-charge rules. The invoice should state: "Reverse charge, customer to account for VAT in [country]." Conversely, when a UK business buys most services from a non-UK supplier, the UK business self-accounts for VAT at the UK rate (typically 20%), shows it as both output and input tax on the same VAT return, and effectively pays no net VAT if the input is fully recoverable.

2. Domestic construction industry reverse charge (effective 1 March 2021). For VAT-registered businesses supplying construction services to other VAT-registered businesses in a chain (where the receiving business is not the end user), the supplier does not charge VAT. Instead, the customer accounts for the VAT on its own return. The invoice must clearly state "Reverse charge: customer to account for VAT to HMRC" and show the VAT rate that would have applied if the reverse charge didn't.

If you operate in construction, this is one of the most-commonly-mishandled rules. Whether a supplier under-collects (believing the reverse charge always applies) or over-collects (applying normal VAT to a reverse-charge transaction), HMRC will adjust.

Making Tax Digital, in practice

Since April 2022, every VAT-registered business (regardless of turnover) must comply with Making Tax Digital for VAT. The requirements are straightforward:

Digital record-keeping. Sales and purchase records must be kept in a digital format. Paper records or hand-typed numbers into HMRC's portal are no longer acceptable.
Digital submission. VAT returns must be submitted via HMRC-compatible software, using the MTD API. The old "VAT online" web portal is closed for VAT.

Compatible software includes the major accounting platforms (Xero, QuickBooks, Sage, FreeAgent, Zoho Books, Wave, FreshBooks). If you keep records in spreadsheets, you can use bridging software that pulls the totals from your spreadsheet and submits the return to HMRC. The "digital link" requirement means the connection between your records and the submission must be a software link — not a manual re-type of numbers.

Penalties under the new VAT penalty regime (effective from January 2023) are points-based for late filing and percentage-based for late payment. Don't ignore filing deadlines.

Filing periods

VAT returns are usually quarterly. HMRC assigns you a "stagger" (your quarter end might be Mar/Jun/Sep/Dec, Apr/Jul/Oct/Jan, or May/Aug/Nov/Feb) at registration. The return is due one month and seven days after the period end (so, Q1 ending 31 March is due 7 May).

Annual accounting is available for businesses with annual VAT-taxable turnover up to £1.35 million; you make estimated payments through the year and reconcile at year-end. Less common but useful for businesses with predictable cash flow.

The Cash Accounting Scheme (turnover up to £1.35 million) lets you account for VAT when you actually receive payment rather than when you issue the invoice — useful for businesses with material bad-debt exposure or long payment terms. The Flat Rate Scheme (turnover up to £150,000) lets small businesses charge customers normal VAT but pay a fixed flat-rate percentage of gross turnover to HMRC, with no separate input-tax recovery. The accounting is simpler; whether the numbers work out depends on the business.

Currency and rounding

You can issue invoices in any currency, but HMRC requires the VAT amount to be shown in sterling. The standard conversion is the HMRC monthly exchange rate (published on gov.uk) or the rate published by the European Central Bank, the Financial Times, or your bank: whichever you choose, be consistent.

When rounding, the convention is to round each VAT line down to the nearest penny when calculating per-line VAT, or to apply VAT to the invoice total and round the final VAT amount. Both are acceptable; consistency matters more than which method.

Common UK VAT mistakes to avoid

Not registering on time after crossing £90,000. Penalties scale with how late, and you owe HMRC the VAT that should have been collected from your sales since the registration date, even though you didn't charge it to the customer.
Using the old £85,000 threshold. It changed on 1 April 2024.
Missing the VAT number on invoices. This is the field HMRC inspects first. Invoices without a valid VAT number do not entitle the buyer to reclaim input tax.
Treating exempt and zero-rated as the same. Both show no VAT line to the customer, but they have very different consequences for your input-tax recovery.
Not applying the reverse charge in construction. The single most-commonly-mishandled VAT rule in the UK construction sector.
Skipping MTD-compatible software. Spreadsheets alone are not compliant; you need bridging software at minimum.
Issuing invoices in foreign currency without the sterling VAT figure. HMRC requires the VAT in sterling regardless.

A 7-line UK-invoice checklist

Sequential, unique invoice number (no gaps)
Your VAT registration number prominently shown
Customer name and address (full VAT invoice)
Tax point (time of supply) shown
Each line item with rate excluding VAT and VAT rate applied
Total VAT in sterling
If the reverse charge applies: the required wording shown clearly

Ready to invoice from the UK?

Issueable's UK invoice generator handles the VAT-rate breakdown, sterling totals, and reverse-charge wording HMRC expects, and exports a clean PDF you can keep alongside your MTD-compliant records. Create an invoice.

Frequently asked questions

When do I have to register for VAT?: You must register if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the threshold increased from £85,000 to £90,000 on 1 April 2024). You must also register if you expect to exceed the threshold in the next 30 days, even if your past 12 months were below it. Below £90,000 you can register voluntarily; this lets you reclaim VAT on business purchases (input tax). The deregistration threshold is £88,000, so if your turnover drops back below that you can apply to deregister.
What VAT rates apply in the UK?: Three positive rates, plus a couple of categories that sit outside them. The standard rate is 20%, which covers most goods and services. The reduced rate is 5%, covering domestic fuel and power, children's car seats, certain energy-saving materials, mobility aids for older people, and a few other narrowly defined categories. The zero rate is 0% and applies to most food, books and newspapers, children's clothing and footwear, public transport, prescription drugs, women's sanitary products (zero-rated since 1 January 2021), and most exports. Exempt supplies and supplies outside the scope are separate categories: they carry no VAT and don't allow input-tax recovery on related expenses.
What does HMRC require on a VAT invoice?: Per VAT Notice 700/21, a full VAT invoice must include: a unique sequential invoice number, the time of supply (tax point), the date of issue if different, the supplier's name, address, and VAT registration number, the customer's name and address, a description sufficient to identify the supply, for each line the quantity, the rate excluding VAT, and the VAT rate applied, the total excluding VAT, the rate of any cash discount offered, the total VAT payable in sterling, and the total amount payable. For sales below £250 (gross), a simplified invoice is allowed, with reduced fields. For B2C, you generally don't need to issue a VAT invoice unless asked, but the receipt should still show your VAT number and the VAT amount.
What is the reverse charge?: The reverse charge shifts the obligation to account for VAT from the supplier to the customer. It applies in two main UK scenarios: (1) most B2B services bought from suppliers outside the UK by UK VAT-registered businesses: the customer self-accounts for VAT under place-of-supply rules; (2) the domestic reverse charge for building and construction services, in effect since 1 March 2021, where VAT-registered subcontractors don't charge VAT on supplies to other VAT-registered contractors in the chain, the contractor accounts for the VAT instead. When the reverse charge applies, your invoice must clearly state 'Reverse charge, customer to account for VAT to HMRC.'
What is Making Tax Digital and does it apply to me?: Making Tax Digital (MTD) for VAT requires every VAT-registered business (regardless of turnover, as of April 2022) to keep digital VAT records and submit VAT returns through HMRC-compatible software, not the old online portal. You need software that can generate VAT returns from your digital records and submit them via HMRC's API. Most modern accounting software (Xero, QuickBooks, Sage, FreeAgent) is MTD-compatible. If you're using spreadsheets, you need 'bridging software' that connects them to HMRC. Penalties apply for non-compliance.
What's the difference between zero-rated and exempt?: Zero-rated supplies are taxable supplies at a 0% VAT rate; you charge no VAT to the customer, but you can recover the input VAT on related purchases. Exempt supplies are entirely outside the VAT system; you charge no VAT and you cannot recover input VAT on related purchases. Examples of zero-rated: most food, books, children's clothing, exports. Examples of exempt: insurance, finance and credit, education, health services, residential rents, and most postal services. If you make a mix of taxable and exempt supplies, you'll need to apportion your input tax, known as partial exemption.

Related Resources

What to put on an invoice Invoice generator (UK)VAT calculator Sales tax receipts