VAT Value Added Tax Explained - The Basics

🔴 What is VAT? When do you register for VAT, when must you starting charging VAT? VAT Value Added Tax tends to throw out alot of questions. It is simple in principle but can get quite complex in practice. In this VAT explained video we’re taking a look at the basics of VAT, the stuff you need to know to get started. We’ll go over some special VAT schemes as well as the points in your business journey where you must start paying VAT, and in turn, must start charging VAT value added tax to your clients/customers.

View Our VAT Value Added Tax Page for Tables & Additional Resources Mentioned in This Video:

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⏱️ Time Stamps:
0:41 - What Is VAT?
3:00 - When Must You Register For VAT?
6:06 - When Must You Start Charging VAT?
7:07 - Special VAT Schemes
9:45 - How To Report and File VAT Returns

The current VAT Threshold is £85,000 for the UK as of the date of this video. This means that if your annual VAT taxable turnover exceeds this amount on what is known as a 12 month rolling basis then you are legally required to register for and start charging VAT. You are also able to register for VAT voluntarily, before hitting the VAT threshold if this works out for your business in terms of the numbers. In our professional experience, it's well worth getting a VAT evaluation from an accountant you trust to see if you could be saving money by voluntarily registering for VAT. Remember as a business, every time you make a purchase of goods or services, the chances are you will be or have paid up to 20% of VAT (in the UK) on that purchase. Being VAT registered allows your business to claim back the 20% of VAT it has incurred. And in the early days or even along your business journey, this can accumulate into a sizeable amount of cash.

Knowing when to register for VAT can be tricky. You need to know your numbers, because if your business exceeds the current VAT Value Added Tax threshold and you don't register in time, you can be fined by HMRC.

Once your business has registered for VAT, it must start charging VAT to clients and customers. Not all vatable supplies are charged at 20% in the UK. This VAT explained video will highlight the other rates and for what group of goods and services they are applied.

There are some special VAT schemes in the UK. The most popular and common scheme is the standard rated VAT scheme. There is also the flat rate scheme, cash accounting scheme, annual accounting scheme and VAT Moss (VAT mini one stop shop).

Finally, reporting and submitting VAT returns is covered in the final section of this VAT explained video. It is imperative that VAT returns and submitted on time, and accurately as HMRC impose various penalties, fines and surcharges for improper VAT calculations and submissions.

Are you VAT registered? Let us know in the comments your experience with paying & charging Value Added Tax!

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Our videos are for general guidance, education and empowerment in helping you understand accounting, tax and your numbers. They in no way constitute specific advice to your specific circumstances. Me & my team would be delighted to help you with your specific queries or accounting requirements through a formal engagement.

#VAT #ValueAddedTax #VATExplained

[tonydCFO]

VAT although simple in principle, can be tricky and often complex in practice for businesses. This VAT explained video goes through the basics and hopefully answers some of the most common questions about VAT.

What Is VAT? - 0:41
When Must You Register For VAT? - 3:00
When Must You Start Charging VAT? - 6:06
Special VAT Schemes 7:07
How To Report and File VAT Returns 9:45

[The-prosperity-Hub]

thank you very much for a very clear explanation. im approaching 50 years and have not made an effort to learn about VAT. fortunately i am currently reading a book on property investment and therein is a chapter on Tax and VAT formed a part of the chapter. so, i decided to come to youtube for more explanation because the book was not so clear. once again for accommodating lay people like me. Audrey from South Africa

[clarifeacierda]

Thanks for this♥️ I need this one as I am a bookkeeper in Uk base company. Do you have video about reverse charge tax?

[highgatehandyman]

Hey T. These are really excellent videos mate. Thanks for doing these consice presentations. Very informative and useful all round especially to aspiring people who desire to get ahead

[felikschen]

You speak excellently. My VAT application has been approved, and I have also received the certificate，and it shows that I have joined the “VAT Annual Accounting Scheme” and “Flat Rate Scheme”，When I log in to My Government Gateway user ID, the system asks me to add a 9-digit VAT tax number. However, every time I enter it, it keeps showing a format error message saying “Enter a VAT number in the correct format.” What could be the reason for this?

[mrgrehan]

do the first person not pay any vat? surley they dont get their stuff for free with out vat

[ilkbaharkunduzu]

When a foreign firm sell a good that is outside UK and EU at the point of sale VAT is charged which will be paid to government through HMRC quarterly. Below 135 Pound there will be no additional custom duty when you send this product to buyer in UK. However, you have VAT accounting but a a foreign business you warn money. Don't you give UK government any money for the products you sell below 135 Pound? Any yearly payment or anything?

[funfinkids]

We applied for VAT, after 30days we got a questionnaire, 3 days ago we filled the questionnaire, now the question is when will we get the VAT Number,
Kindly help

[liwong]

great content! the VAT threshold 85K, does it include the sales to the EU and non-EU countries as well? Thanks!

[loveiswinner]

thanks but I have a question. Someone find job for me and I suppose scam and ask her to gave me her VAT number. And when i checked VIES VAT number validation
that VAT number it says valid VAT. What do you recommend me?

[gosiat]

Hi, what rate would be for the baby blanket and curtains designed for the baby room?

[aysekeskin]

How much is cost of registering vat tax certificate for forex non resident eu

[nicolaea]

Hi. I buy some items from alibaba and I want to sell on ebay. I have Eori but with VAT I don't have. What is it to do ?

[accountingincometax]

Ur way of explanation is awesome sir .
Do u provide online classes for accounting and taxation for accountants i am ready to pay fees ...

[mostaq]

Does anyone know this
If turnover is £100k then do I pay vat on £15k or the whole £100k?
Thanks

[DuaneJasper]

Thanks for the great video. I have a self employed business letting out rooms and paying a guaranteed rent to landlords. Because of thisi have a high turnover of around £200k, but the expenses of paying the ground rents and utilities are about £170k, will I need to be VAT registered?

[callumberry]

hello - can somebody help me? to sell VAT products do you have to be VAT registered? or can you decide whether or not you wish to, providing you're below the £85, 000 limit. It seems like such a basic question but i can't find the answer anywhere! thanks!