VAT Registration Basics
VAT is a turnover based tax rather than profits based such as Income Tax, Corporation Tax or NI.
If your business turnover is less than £90,000 (2024/25) a year then it doesn’t apply – this will take many Yoga Businesses outside of VAT.
VAT Cliff Edge
Be aware of the “cliff edge” effect of VAT, in other words if your turnover is £89,999 no vat is due, if its £90,001 then you pay VAT on everything.
As an extreme example, if your turnover is £89k you pay no VAT. If your turnover is £91,000, you pay £15,166. If you do go over the VAT threshold the break even turnover is £108,000.
See a Case Study on the Cliff Edge – follow this link to open in a new window
Liability to Register
If your business income goes over £90,000 on a rolling 12 month basis (2024/25), then VAT registration is necessary and you need to research this further, and take advice. There may be some ways to restructure business operations and save VAT, but this needs careful planing and implementation.
See a Case Study Setting This Out – follow this link to open in a new window
VAT works on an entity basis, so if you are a sole trader with 2 or 3 separate businesses they are aggregated together – this can often be sidestepped by incorporation or bringing a family member in as a partner, so long as thats a genuine move and not motivated by tax saving. See VAT Mitigation
Sometimes we’ve been asked by Yoga Teachers about registering voluntarily for VAT – you can do this where your turnover is below the threshold. The temptation arises to get VAT back on expenses, eg hiring a venue for a workshop, or studio rent, however it means you have to charge VAT on all your income which outweighs the saving; unless you put your prices up and risk losing business. We cover this a bit more in this page Can I Register Voluntarily to Claim VAT Back on Expenses?
