Charging VAT?
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- isakosmo
Quick question - as a freelancer (not a limited company), do you add VAT to your invoices to clients? First time I send my own invoice rather than going through an agency so not sure how it works?!
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- MSL0
No. But bear in mind that you need to keep 20% of each invoice to pay for your tax return when it's due.
- RumperChunk0
You have to be registered for VAT, and you have to be registered by law once your turnover is about £67k... (as a company) you NEVER just add VAT to an invoice just because you're freelance.
- maikel0
Below the threshold mentioned above ^ you can voluntarily register yourself for VAT. You can benefit on discharging VAT from your purchases if you are in, but not sure if it works for sole traders (which is what you effectively are, unless you listed yourself as something else).
In any case, you cannot charge for something that you are not paying. Basically, you collect VAT to pay it in your taxes. If you are not registered, do not bill it.
Britain is pretty much straight forward for this things, thankfully.
- isakosmo0
Ok great... Thanks for the info :)
- honest0
Check with your accountant to see if you qualify for Flat Rate : http://www.hmrc.gov.uk/vat/start…
- ximeraLabs0
The current VAT threshold in the UK is £73K. If you earn below that you don't need to register — only once you breach that limit. And what Maikel says re: voluntary registration.
- I think we can say most people on here earn below that!Maria23x
- honest0
Claim the 20% as "service charge" like restaurants do
- Horp0
If you do go over the threshold start charging vat immediately though. Its not optional and it comes into effect the very moment you go over, not the next financial year or a month afterwards or anything like that - straight away. The R&C will be taking their cut of your income even if you didn't add vat to your invoices. This happened to me in a year when I earned a stupidly large amount of money. I didn't realise I had to start charging VAT immediately after the threshold and I sailed way past it then got caned with a massive revenue bill.
Had to go cap in hand to all my clients and ask them to accept and pay additional VAT invoices. Managed to recoup 100% of the VAT, but any one of my clients - or all of them - could just have easily said "Didn't add the vat? tough shit... we're not paying it now" and I'd have been well and truly sunk.