John asks: “I’m looking into freelance teaching. My costs will be zero, but I’m trying to work out is if I need to include VAT on my invoices or not. I’m not expecting to earn more than a few thousand at most in the year. Do I need to register for VAT?”

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Question 24 – Do I Need To Register For VAT? – Shownotes

Today’s question comes from John:

I’m just about to lose my job and am looking into freelance teaching. My costs will be effectively zero, but I’m trying to work out is if I need to include VAT on my invoices or not.

This is likely to be a very temporary thing and I’m not expecting to earn more than a few thousand at most in the year.

Do I need to register for VAT?

Quick one this week for John.

In the UK, you are not required to register for VAT unless your revenue is over £82,000 a year.

So, anywhere below that limit and you don’t need to charge VAT.

 

 

What Is VAT & How Does It Work?

Just as a brief explanation of VAT, if you were registered for VAT, for your sales you would need to add VAT onto your sales price. So, say that was at 20%, you may charge £1,000, but you would need to invoice your customer for £1,000 plus another £200 in VAT.

Then, at the end of the year, you would have to pay the government that £200. However, on the other hand, when you buy something that you need to generate revenue, it is only ever the end user who will pay the VAT.

So, say you bought some teaching materials for £100 and was charged £20 VAT on that, then if you were selling these materials on, you would actually reclaim the £20 that you paid from the government at the end of the tax year. However, if you sold that item for £110, you would need to add £22 VAT on the sale. So, as a net position, you’d pay the £2 VAT to the government at the end of the year.

 

VAT’s A Nightmare – Avoid It If You’re Below The Limit

Effectively, and put simply, VAT is a admin nightmare, and if you can avoid it because you fall below the limits, you should. The only way to benefit from being VAT registered if you are below the exemption limits is to reclaim more VAT than you would charge. However, to do that, you’d need to be making a loss in your business, which isn’t that great.

To conclude, you are below the limits for having to become VAT registered so just forget about it all!

 

 

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