[{"id":"f30cc857-a7eb-42c6-a820-de13b6caffab","cells":[{"id":"ea6d712a-dd77-4340-9162-64a080fc2bfe","inline":null,"size":12,"layout":{"plugin":{"name":"peracto/layout/container","version":"1.0.0"},"state":{}},"rows":[{"id":"3fccfbd1-cf42-4b6f-bee8-2311e4c463a1","cells":[{"id":"4f01049e-ee46-4daa-87ca-b9415ee97cd2","inline":null,"size":12,"content":{"plugin":{"name":"peracto/content/text","version":"1.0.0"},"state":{"text":"

Whether you’re a self-employed tradesperson or own a small plumbing or heating firm you’ve probably got some questions about VAT registration. It’s a hot topic, and what’s right for someone else’s business may not be right for you.

At Williams, we’ve been dedicated to providing excellence since 1972 and we love to see our customers thrive. So, to answer your questions, we’ve put together some no-nonsense advice about getting VAT registered as a tradesperson.

Firstly – what is VAT and who can get VAT registered?

VAT stands for ‘Value Added Tax,’ so it’s essentially an added sales tax for goods and services. The standard rate of VAT currently stands at 20%.

You’re legally required to register for VAT if your business turnover during any 12-month period (not just over the tax year) is £85k or more. If you’ve already reached this amount and haven’t registered yet, then head to the HMRC website and get registered now!

If your turnover is lower, you can still choose to get VAT registered. So why might you do this, and what could it mean for your business?

What does it mean for your customers?

The most obvious disadvantage to your customers is that your services become more expensive – because you need to collect a 20% VAT charge on all your jobs, and hand this over to HMRC.

You might be worried that your customers won’t want to pay extra for the same service, particularly if they have grown used to your current costs. However, it’s worth remembering that you offer your customers more than just competitive pricing. If you have built a relationship, or have a great reputation in the market, then people will trust you to do the job well - which is often more important to many customers than getting the cheapest service possible.

That said, if your core customer base is heavily reliant on lower pricing then voluntary VAT registration might not be right for you.

What can it mean for your margins?

One of the biggest benefits of getting VAT registered is that the equipment you need will be cheaper. When you are VAT registered, you can claim back 20% VAT on all your business expenses – that includes fuel, parts, tools and even vehicles.

Nearly all goods have VAT added, so essentially, you will be paying the base price for that product, rather than the +VAT price that the average consumer pays.

Say you need a new van that costs £9000 +VAT. VAT will add 20% onto the price of £9000, making the overall cost £10,800. As a VAT registered business, you can claim this 20% back, meaning you will pay the base price of £9000. Compared to the average consumer, you will save £1800. That’s a big win, and it’s the same for all your VAT taxed expenses. So, if you’ve been wanting to increase your margins on materials, getting VAT registered can help.

What is the deal with admin?

There’s no getting around it, becoming VAT registered creates a whole heap of admin which can become a burden on your time and energy.

There are many additional bookkeeping requirements. You need to carefully keep track of your taxable supplies and non-taxable purchases, and complete VAT returns every three months.

Being VAT registered also comes with compliance regulations, and it’s your responsibility to make sure your business sticks to the VAT rules. This means keeping accurate records, filing VAT returns on time, and staying up to date with changes to the VAT rules and regulations.

Most VAT registered tradespeople find they need to use a business accounting software and/or accountant - or get help from a family member - to manage this extra workload, so take these additional costs into consideration if you’re thinking of registering. Williams has partnered with Powered Now, a business software app, to give 200 of our customers a one year free trial – if you’d like to try before you buy!

What can it do for your business?

Have you been turning down jobs or not working to avoid hitting the £85k ceiling? Putting a cap on your turnover can limit your take home pay too. If you’re looking to boost your earnings, biting the bullet and registering for VAT might be the push you need. It can be a stressful transition - particularly getting used to the increased admin and compliance obligations - but many tradespeople find that the long-term rewards on the other side more than make up for the short-term pain.

On the other hand, if you’re happy with your business as it is, and want to continue earning a living in peace, then you might decide that getting VAT registered is not worth the hassle.

At the end of the day, only you can decide what will work for you. If you are considering becoming VAT registered, it’s always recommended to contact a qualified accountant who can help you judge what is right for your circumstances. There are both advantages and disadvantages to becoming VAT registered, so remember there is no rush, and no right or wrong decision (as long as you register as soon as you hit £85k turnover!).

"}}}]}]}]}]

The Williams guide to everything you need to know about VAT registration