VAT

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Understanding VAT: What it is, When you need to register, and What to do next

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VAT (Value Added Tax) is one of those things that often pops up once your business starts to grow, but many business owners aren’t quite sure when it applies or what’s expected of them.

At SA Lee Accountancy Ltd, we’re here to simplify VAT, helping you understand what it is, when you need to register, and how to stay compliant.

What is VAT?

VAT is a tax added to the sale of most goods and services in the UK. If your business is VAT-registered, you charge VAT on your sales and reclaim VAT on eligible business expenses.

The standard VAT rate is 20%, though there are reduced rates of 5% (for certain goods and services) and 0% (for others, like most food and children’s clothes). Whether you apply standard, reduced or zero rate depends on what you sell, but VAT-registered businesses still need to record and report it.

When Do You Need to Register for VAT?

You must register for VAT if your VAT-taxable turnover exceeds £90,000 in any 12-month rolling period (as of 1 April 2024). You can also choose to register voluntarily if you’re under the threshold; sometimes this can make your business look more established or help you reclaim VAT on start-up costs.

It’s important to monitor your turnover carefully as HMRC requires you to register within 30 days of crossing the threshold.

How Often Are VAT Returns Due?

Once registered, you’ll need to submit VAT returns, usually every quarter. This involves reporting:

  • The amount of VAT you’ve charged your customers
  • The amount of VAT you’ve paid on business purchases
  • The difference (which you either pay to HMRC or reclaim)

VAT returns and payments are normally due one month and seven days after the end of each accounting period. Returns are submitted through Making Tax Digital (MTD)-compatible software, so it’s important to keep accurate digital records.

Staying on Top of VAT

VAT can feel complicated—but it doesn’t have to be. At SA Lee Accountancy Ltd, we work with businesses across different sectors to handle their VAT registration, returns, and compliance. Whether you’re approaching the threshold or already registered, we can support you with tailored advice that keeps things stress-free.

Need help with VAT registration or returns?
Get in touch today, we’re always happy to help you make sense of the numbers.

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HMRC Penalties for Self Assessment, VAT and Corporation Tax: What You Need to Know

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Missing a tax deadline can be stressful—but it can also be costly. HMRC imposes different penalties depending on whether you’re late submitting your return or late making a payment, and these vary across Self Assessment, VAT, and Corporation Tax. At SA Lee Accountancy, we help clients stay on top of their tax obligations so they can avoid unnecessary charges and stay in control.

Here’s a quick guide to help you understand the key penalties and how to avoid them.

Self Assessment Penalties

Late Filing:

  • £100 fixed penalty if your return is up to 3 months late
  • Daily penalties of £10 per day after 3 months (up to 90 days)
  • Additional penalties of 5% of tax due (or £300, whichever is greater) at 6 and 12 months late

Late Payment:

  • 5% of tax unpaid after 30 days
  • A further 5% if unpaid after 6 months
  • Another 5% if still unpaid after 12 months

Even if you can’t pay straight away, it’s important to file on time to avoid escalating penalties. You can view the full list of Self Assessment penalties on GOV.UK.

VAT Penalties

HMRC introduced a new penalty system for VAT periods starting on or after 1 January 2023.

Late Filing:
You’ll receive penalty points each time you miss a deadline. Once you hit a certain threshold (based on how often you file), you’ll be charged a £200 penalty and another £200 for each additional late return.

Late Payment:
Interest is charged from the payment due date. If payment is late by:

  • 16–30 days: 2% penalty
  • Over 30 days: 2% + an additional 2% (total 4%), plus daily interest

For VAT-specific penalties under the current points-based system, HMRC’s VAT penalty guidance outlines the full breakdown.

Corporation Tax Penalties

Late Filing:

  • 1 day late: £100
  • 3 months late: another £100
  • 6 months late: HMRC will estimate your tax bill and add a penalty of 10%
  • 12 months late: another 10% of unpaid tax

Late Payment:
Interest is charged on late payments, even if you’ve filed on time.

Avoiding Penalties

The best way to avoid penalties is to stay ahead of deadlines. Set reminders, file on time, and if you think you’ll struggle to pay, speak to HMRC or your accountant as early as possible—payment plans are often available.

At SA Lee Accountancy, we work with individuals and businesses to ensure their returns are submitted correctly and on time. If you need support with Self Assessment, VAT, or Corporation Tax, get in touch, we’re here to help.