When To Become VAT Registered? – Samuel Leeds
In this blog, I’m going to talk about VAT—Value Added Tax—what it is, and if you need to be VAT registered.
This was an emotional rollercoaster for me because growing up; I didn’t have many business-oriented people; I didn’t have access to expert advice. I was only sixteen when I left school, got into property investing, became successful, and realized that VAT was a thing!
What is VAT?
Value Added Tax is the tax that is continuously added and which you have to pay all of the time, whether you like it or not. Even if you’re not VAT registered, you’ll still be paying VAT. Every business in the UK is VAT registered. Therefore, when you buy anything, or when you avail of a service, you pay VAT without even knowing. VAT is the 20% tax added on top of any payment. For example, if you’re staying at a hotel, they won’t say the cost is a hundred pounds plus VAT, they say the hotel is a hundred-and-twenty pound. Then, the hotel will give the twenty pounds to the VAT man and be left with the hundred pounds—which they will be paying tax on too!
VAT Registered—the good and the bad!
If you’re VAT registered, and whenever you pay for a commodity or service and pay VAT on it, you can claim it back! If, for example, I stay at a hotel, and pay the cost plus VAT on it, I can ask the manager to give me the VAT receipt and then claim the VAT back from the VAT man by showing them the receipt.
Now here’s the bad thing about being VAT registered: you would have to pay the VAT when you charge anyone for your products or services.
Should you be VAT registered?
Now, you must be thinking: do I want to be VAT registered or not?
Well, it’s your choice at first. However, if you have a turnover of eighty-five-thousand pounds or more, you suddenly don’t have an opportunity and have to be VAT registered by law. So, I want to give you a warning right now because so many of my students pass that eighty-five-thousand threshold pretty quickly. You may be thinking eighty-five-thousand pounds per year is far away for my business; however, let me remind you that it is turnover and not profit.
So if you’re in a business like serviced accommodation where you’re getting a hundred pounds for a night for renting your property, and you rent out twenty-times a month, that’s going to add up. So if you get to the eighty-five-thousand pounds threshold, talk to an accountant and get yourself VAT registered.
It was a bit of a roller coaster for me because firstly, I didn’t even know I needed to be VAT registered, and I started my deal sourcing company and was selling deals quickly, and suddenly I thought to myself, “Holy Moly I need to be VAT registered!” I was afraid that when I increased my prices by 20%, my customers would complain. But guess what? When I raised my rates, nobody cared! I’ve been VAT registered for years and can claim the VAT money back with my receipts.
A Final Word
That was a mini crash course. I hope it helped you! If it did, you might find more videos on my YouTube channel where you can engage with me and ask any questions that you may have, and I’ll try my best to answer them. Moreover, if you’d like me to mentor you, you can avail of my courses at samuel365!
🗣️FOLLOW ME ON SOCIAL MEDIA:
Facebook Group: https://www.facebook.com/groups/77861…
Facebook Page: https://www.facebook.com/OfficialSamu…