Freelancers have relatively simple accounting and tax requirements. However, VAT requirements are significant and compulsory if your turnover is £83,000 or over each year.
Rates of VAT for Freelancers
Once you have registered for VAT, the VAT rate that you must charge will depend on the type of goods or services that you supply.
The standard rate of VAT is 20% which covers most goods and services, however there are some exceptions to this rule. The reduced VAT rate for some gas and electricity is 5%. Some goods and services have a 0% VAT rate which encompasses most food and children’s clothes. Some goods and services in the sports, antiques and charity sectors are VAT exempt. To ascertain what VAT rate you would have to charge can be found at https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services
Freelancers must submit a VAT return every three months
Your VAT return must be submitted every three months and your deadline is shown on your VAT return. HMRC must receive your VAT payment by this deadline otherwise a surcharge will apply. Note that some forms of payment can take 3 working days to arrive at HMRC’s bank account and this time delay must be taken into account.
A VAT payment deadline calculator can be accessed via www.gov.uk/vat-payment-deadlines
Freelancers can register for VAT voluntarily
You can opt to register for VAT on a voluntary basis before you meet that threshold hence benefitting from reclaiming VAT on all purchases made from VAT-registered suppliers. However, if you regularly deal with companies that aren’t VAT-registered you need not voluntarily register for VAT as your business would benefit.
VAT advice from Specialist Accountants for Freelancers
Pearl Accountants specialise in providing Freelancers with their VAT registration and filing. View our dedicated section Accountants for Freelancers for a full description of our specialist accounting services we offer Freelancers.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.