VAT registered business vs Non-VAT registered (under threshold)
Side-by-side comparison, when-to-use-each guide, and instant conversion. Reviewed for 2026.
Turnover over £90k (mandatory), B2B sales where customers can reclaim VAT, buying significant VAT-able goods and services.
Under £90k turnover, primarily B2C sales where 20% price increase would reduce competitiveness.
| Aspect | VAT registered business | Non-VAT registered (under threshold) |
|---|---|---|
| Threshold (2026) | £90,000 taxable turnover | Below £90,000 |
| VAT charged to customers | 20% standard rate (mostly) | No |
| Input VAT recovery | Yes | No |
| Admin burden | Quarterly/monthly returns | None |
| VAT on imports | Must account for | Simpler at low volumes |
Frequently asked
Should I voluntarily register for VAT?
If >50% of your sales are to VAT-registered businesses (who'll reclaim it anyway): yes, register early. You'll reclaim input VAT on your costs. If selling mainly to consumers: no — you're effectively adding 20% to your prices unless you absorb it. The calculation changes at different margins.
What is the Flat Rate Scheme?
Small businesses with VAT-exclusive turnover under £150,000 can use the Flat Rate Scheme: charge customers 20% VAT but pay HMRC a fixed percentage (7-16.5% depending on industry) of gross turnover. For businesses with low costs, this can mean keeping some VAT as profit.