VAT Guide for Suffolk Businesses
Starting a Business: Sole Trader or Ltd?
One of the first questions we hear is: “Does my business structure change how I handle VAT?” The short answer is that the VAT rules are the same for everyone, so there are lots of factors to consider when making this decision, but VAT is not one of them. Whether you are a Sole Trader (self-employed) or a Limited Company, the requirement to register for VAT is based on your turnover, not your legal structure.
How to Decide
Sole Trader: You and the business are one legal entity. VAT registration is linked to your personal UTR (Unique Taxpayer Reference).
Limited Company: The company is a separate legal entity. The VAT registration belongs to the company itself.
The Thresholds (2026/27)
You must register for VAT if your taxable turnover (the total of everything you sell that isn’t VAT-exempt) exceeds £90,000.
The 12-Month Rolling Rule: This isn’t based on your tax year. You must look back at the end of every month; if your total sales for the previous 12 months hit £90,000, you must register.
The 30-Day Forward Look: If you expect your turnover to go over £90,000 in the next 30 days alone, you must register immediately.
Even if you earn less than £90,000, you can voluntarily register. This is often a good idea if you sell mainly to other VAT-registered businesses (who can reclaim the VAT) or if you have high startup costs and want to reclaim the VAT you’ve paid out.
What is VAT Applied To?
VAT is a consumption tax charged on most goods and services. However, not everything is charged at the same rate. Understanding these categories is vital for your pricing strategy.
VAT Type | Rate | Examples |
Standard | 20% | The default rate for goods and services |
Reduced | 5% | Home energy, children’s car seats, some renovations, mobility aids |
Zero | 0% | Most food, children’s clothes, books, newspapers, and education |
Exempt | N/A | Insurance, postage stamps, health services |
It is important to note that zero-rated and exempt are not the same. If you sell zero-rated goods, they still count toward your £90,000 threshold. If you only sell exempt goods, you usually cannot register for VAT.
Who Can Claim What on VAT?
The biggest perk of being VAT-registered is the ability to reclaim the VAT you pay on business expenses (known as Input Tax).
Who can reclaim?
Only businesses registered for VAT can reclaim VAT. If you aren’t registered, the VAT you pay to suppliers is simply an extra cost to your business.
What can you claim?
You can generally reclaim VAT on:
Standard Business Costs: Office rent (if VAT is charged), utility bills, and professional fees.
Stock and Equipment: Computers, tools, and raw materials for your products.
Travel & Subsistence: Employee travel and meals for business trips (excluding your daily commute).
Pre-registration costs: You can often reclaim VAT on goods bought up to 4 years ago (if you still have them) and services bought up to 6 months before your registration date.
What can’t you claim?
Personal use: If you buy a laptop and use it 50% for work and 50% for personal use, you can only reclaim 50% of the VAT.
Client Entertainment: Generally, you cannot reclaim VAT on entertaining clients.
Exempt Items: You cannot reclaim VAT on expenses used to make exempt sales.
Need help getting your VAT returns sorted?
With Making Tax Digital (MTD) now mandatory, VAT must be managed through compatible software. At Hedges-Quinn, we help Suffolk businesses stay compliant and ensure they never miss a penny in reclaims.
If you need further help understanding VAT, get in touch with Hayley today for a chat. Please call the office on 01473 657853 to arrange a convenient time to discuss how we can support you and your business.