Value Added Tax (VAT) plays a crucial part in how most goods and services are sold in the UK. Still, as with most tax matters, it can get complicated - especially when it comes to making VAT claims.

In today’s article, we'll explore VAT claims for non-VAT registered individuals and sole traders, from who is eligible to how to register for VAT.

Understanding VAT claims

Let’s start with the basics:

What is VAT?

VAT (Value Added Tax) is a consumption tax added to most products and services sold by VAT-registered businesses. 

It's ultimately borne by the end consumer, but businesses are responsible for collecting and paying VAT to HMRC.

Who has to register for VAT?

All businesses in the UK - including sole traders - must register for VAT with HMRC if their taxable turnover exceeds the VAT registration threshold, which is currently £90,000 for 2024/25 (£85,000 for 2023/24).

However, you can also choose to register even if your turnover is less than £90,000. 

Once registered, businesses charge VAT on their sales, which is known as output tax. They can also claim back VAT on their business purchases, which is called input tax.

Wondering if your digital services business needs to register? Be sure to check out our ultimate guide which makes VAT for digital services clear and easy.

Can I claim VAT back as a sole trader? 

Yes, you can make a claim for VAT on all the goods and services you purchased for your business as soon as your business is VAT registered.

Can I claim VAT back even if I’m not VAT registered?

No. In general, you must be VAT registered to claim for VAT on the goods and services you’ve purchased for your business. 

However, while non-VAT registered individuals cannot reclaim VAT on most business expenses, there are a few exceptions. For example, you might be able to claim VAT back for certain specific expenses via HMRC’s website if your organisation is a local authority, academy school or charity. This includes things like VAT paid on capital assets, exports outside of the EU and expenses related to charitable activities.

How to claim VAT back as a non-VAT registered business

To claim VAT online via HMRC's website, eligible organisations need a unique reference number from HMRC, their registered organisation postcode, and the start and end dates for the VAT claim. They also need to provide relevant bank statements and invoice details, which must be submitted within four years of the supply.

Registering for VAT as a sole trader

If you don’t meet the criteria above (i.e. you’re not a local authority, academy school or a charity) and you aren’t VAT registered, you won’t be eligible to claim back VAT.

However, if your annual turnover exceeds £90,000, you’re eligible to register for VAT with HMRC, which will enable you to claim back VAT in future. 

You can read our step-by-step guide to registering for VAT to find out how to get started.

{{tax-guide}}

When to seek help from a tax professional

If you need help understanding your eligibility to make a VAT claim, registering for VAT as a sole trader, or if you’re looking for any type of VAT guidance or other tax-related advice, our new service for sole traders, CrunchONE, might be for you. 

CrunchONE combines award-winning self-employed accounting software with support from in-house accredited accountants to help you make smarter finance decisions and never worry about tax again.

Final thoughts

In short, most individuals, sole traders and businesses will need to register for VAT before making any VAT claims. 

If you were hoping to make a VAT claim this year as a non-VAT registered sole trader or business, we know this news might come as a disappointment. But don’t worry! It’s never too late to get yourself registered for VAT in future, as long as you’re eligible and ideally meet the VAT registration threshold we outlined earlier. 

Consult a professional tax advisor today to find out how to register for VAT, and what kinds of things you’ll be able to claim input tax back for to support your thriving business. Good luck!