Tax and HMRC

When To Register
For VAT.

The threshold that forces your hand, when registering early actually helps, and why the Flat Rate Scheme isn't the easy win it's often sold as for construction.

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This is general guidance for UK sole traders and small construction businesses, not personal advice. VAT decisions are genuinely numbers-specific, run your own figures before choosing a scheme.

The threshold

You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period, not just your tax year, any 12 months. Once you cross it, you have 30 days to notify HMRC, and you'll be registered from the first day of the second month after you went over.

Watch the rolling window, not just your annual total. A strong few months can tip you over mid-year even if your yearly total looks fine on paper.

Should you register before you have to?

You can register voluntarily below the threshold. It's worth genuinely considering, not just accepting as inevitable, if you spend a lot on materials, tools, or a van and want to reclaim the VAT on those purchases.

  • Might helpIf your customers are mostly VAT-registered businesses themselves, they can reclaim the VAT you charge, so it costs them nothing extra.
  • Might hurtIf you work mainly for homeowners, registering means adding 20% to your prices that a non-registered competitor doesn't have to charge, a real competitive disadvantage on domestic jobs.

The Flat Rate Scheme

Instead of tracking VAT on every purchase and sale, you charge customers VAT as normal but pay HMRC a single fixed percentage of your VAT-inclusive turnover. Simpler admin, but not automatically cheaper.

  • General building or construction (materials and labour)9.5% flat rate.
  • Labour-only construction services14.5% flat rate.
  • First-year discountA further 1% off your rate for your first 12 months registered.
  • Join and exit limitsYou can join if you expect turnover of £150,000 or less over the next year, and you must leave if it goes over £230,000.

The 16.5% trap

  • If you spend less than 2% of your turnover (or under £1,000 a year) on goods, not services, you're classed as a "limited cost trader" and pay 16.5% instead of your sector rate, this catches most labour-only subcontractors, who buy very little in materials
Worth knowing if you're in construction If you do work that falls under the CIS domestic reverse charge, those sales are excluded from your flat rate turnover calculation entirely. That materially weakens the case for the Flat Rate Scheme for a lot of construction businesses, it's not the straightforward saving it looks like from the sector percentage alone. Run your actual numbers under both methods before choosing.
Often missed The Flat Rate Scheme isn't all-or-nothing forever. You can leave at any time if it stops suiting you, and it's worth genuinely re-testing once a year, especially after a year where your material costs or customer mix changed.

Not sure if VAT makes sense yet?

Send over your turnover and typical costs and we'll run the actual numbers, standard vs flat rate, before you commit to anything.

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This guide is general information about VAT registration and the Flat Rate Scheme for UK small businesses, correct at the time of writing, and isn't personalised tax advice. Thresholds and sector rates can change, always check anything you're unsure about before relying on it.

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