This is a guide, not tax advice.
The threshold
You must register once taxable turnover exceeds £90,000 in any rolling 12-month period (or you expect to exceed it in the next 30 days). It's a continuous look-back, not a tax-year figure — the moment your last 12 months of invoices tops £90,000, you're in. Miss the 30-day window to notify and you owe VAT backdated to when you should have registered, plus penalties. The VAT calculator helps you keep the running total in view.
Should you register voluntarily?
For it: you can reclaim VAT on tools, van, materials and fuel; some contractors only use VAT-registered subbies; it can look more established.
Against it: quarterly returns and record-keeping; homeowners see 20% added and balk ("£8,000 + VAT = £9,600" is a harder sell); and the reverse charge (below) reduces the benefit for construction work.
Rule of thumb: starting out and working mostly for homeowners — stay under the threshold. Doing £80k+ mostly for businesses — registration starts to make sense.
Standard rate vs the Flat Rate Scheme
Registered, you can use the Flat Rate Scheme if turnover is under £150,000: you still charge customers 20%, but pay HMRC a fixed percentage of turnover instead of tracking every input — commonly around 9.5% for general construction, 14.5% for labour-only work. It's simplest when your material costs are low; if you buy a lot of materials you may do better reclaiming VAT on the standard scheme. It's a way to pay VAT, not a special small-business status.
The domestic reverse charge
For most construction services supplied to VAT-registered contractors, the reverse charge means you don't charge VAT — the customer accounts for it. You show the net amount and a note that the reverse charge applies. It doesn't apply to work for ordinary homeowners, or to materials-only supplies, and it doesn't apply if the customer confirms in writing they're an end user. The invoice generator can carry the reverse-charge wording where you need it.
What counts toward the threshold
Counts: labour, materials and services you invoice — including the gross value of CIS invoices (even though tax is deducted). Doesn't count: grants and loans, one-off capital sales like an old van, or genuinely exempt supplies.
Common mistakes
- Forgetting it's a rolling 12 months, not an annual reset.
- Delaying registration after crossing — you owe backdated VAT and a penalty.
- Registering voluntarily without the appetite for quarterly returns.
- Telling customers "plus VAT" when you're not registered — you can't charge it.
- Not knowing you can deregister once you drop below £83,000.