Once your business is VAT registered, you have to add VAT to most of what you sell and pay it to HMRC. Getting this right from day one saves awkward conversations with customers and nasty surprises on your first VAT return. This guide covers when to start, how much to charge and how to show it.
In short: from your effective date of registration, add VAT at the right rate to every taxable sale, show it on your VAT invoices, and give VAT-registered customers a VAT invoice within 30 days. What you charge is your output VAT, which you pay to HMRC on your VAT return.
Step 1: Know when to start charging VAT
You must account for VAT on sales from your effective date of registration. That date is on your registration certificate. If you registered because you went over the threshold, it's usually the first day of the second month after you went over — see VAT registration threshold explained.
While you're waiting for your VAT number
You can't show VAT on invoices until you have your VAT number, but you still owe HMRC VAT on sales from your effective date. HMRC's guidance is to:
- increase your prices to allow for the VAT, and tell customers why;
- once your VAT number arrives, reissue those invoices as VAT invoices showing the VAT, within 30 days.
If you don't raise your prices during this gap, the VAT comes out of your own pocket.
Step 2: Use the right VAT rate
| Rate | Applies to |
|---|---|
| 20% standard | Most goods and services |
| 5% reduced | A short list, such as domestic gas and children's car seats |
| 0% zero | Items such as most food, books and children's clothes |
| Exempt | No VAT charged, such as most insurance and some education |
Most services a freelancer or small business sells — consulting, design, repairs, marketing, trades — are standard-rated at 20%. Check anything unusual on our UK VAT rates page or in HMRC's guidance.
Step 3: Add VAT to your prices
Selling to businesses
You can quote prices excluding VAT, as long as you make it clear VAT will be added: "£500 + VAT" or "£500 excluding VAT". Your VAT-registered customers will reclaim the VAT, so for them the price effectively doesn't change.
Selling to the public
Prices shown to consumers must include VAT. If you're currently charging £50 and want to keep the same income, your new price at 20% is £60. If you want to keep the same price, your income from each sale drops to £41.67. Deciding between those two is often the biggest business decision when you register.
Tip: the VAT Calculator shows both sides quickly: use Add VAT to find your new price, or Remove VAT to see what you'd keep from your current price.
Step 4: Issue VAT invoices
When you sell to another VAT-registered business, you usually have to give them a VAT invoice within 30 days of the supply (or of receiving payment, if they paid in advance). It must show your VAT number, the VAT rate for each item, the total excluding VAT and the total VAT. For the full list, see what a VAT invoice must include, and for the difference from your old invoices see VAT invoice vs normal invoice.
For retail sales to the public, you only need to give a VAT invoice if the customer asks. Sales of £250 or less can use a simplified VAT invoice, such as a detailed till receipt.
Step 5: Get the tax point right
The tax point (or time of supply) decides which VAT return a sale goes on. The basic tax point is the date you deliver the goods or complete the service. But it moves earlier if:
- you're paid first — the tax point is the payment date (common with deposits); or
- you issue a VAT invoice first — the tax point is the invoice date.
It can also move later: if you issue a VAT invoice within 14 days after the basic tax point, the invoice date usually becomes the tax point.
Existing customers and contracts
- Tell your customers that you're now VAT registered and give them your VAT number.
- Check your contracts. If a contract says prices are "plus VAT", you can add VAT. If a contract doesn't mention VAT, the agreed price is generally treated as including VAT, so you'd have to pay the VAT out of it unless the customer agrees to a change.
- Update your terms, quotes and website so every price makes clear whether VAT is included.
Special cases
- Construction services: many building and construction services between VAT-registered businesses in the Construction Industry Scheme use the domestic reverse charge, where the customer accounts for the VAT instead of you.
- Customers outside the UK: services to overseas businesses are often outside the scope of UK VAT, and exported goods are usually zero-rated. The rules depend on what you sell and to whom, so check HMRC's guidance.
- Discounts: charge VAT on the price after the discount.
- Mistakes: if you've overcharged or undercharged VAT on an invoice, correct it with a credit note or a new invoice.
A quick checklist
- Note your effective date of registration and VAT number
- Decide your new prices: add VAT on top, or absorb it
- Update invoice templates with your VAT number and VAT columns
- Tell existing customers and check contracts
- Set up MTD-compatible software to record VAT and file returns
- Put your first VAT return deadline in your calendar — see how to prepare for a VAT return
Frequently asked questions
Can I charge VAT if I'm not registered?
No. Only VAT-registered businesses can charge VAT. Charging it without being registered is not allowed.
Do I have to charge VAT on everything?
Only on taxable sales. Zero-rated sales are charged at 0%, and exempt sales have no VAT at all.
Can I charge VAT on invoices I sent before I registered?
Not on sales made before your effective date of registration. VAT only applies to sales from that date.
Check your figures
For invoices with several lines or mixed rates, the VAT Invoice Calculator works out the VAT at each rate and the invoice total.
Official sources: GOV.UK: VAT for businesses and HMRC VAT guide (Notice 700).