Are you using the best VAT scheme for your business?

Posted on 12th September 2025 at 12:00

VAT Registration: What You Need to Know

Value Added Tax (VAT) must be charged by sole traders and companies once their taxable turnover exceeds £90,000 in a rolling 12-month period—or if they expect to exceed that threshold within the next three months. At that point, businesses are legally required to register for VAT with HMRC.

You can also choose to register voluntarily before reaching the threshold. This can be beneficial if your business regularly purchases goods or services that include VAT, as registration allows you to reclaim VAT on eligible expenses.

There are several VAT schemes available, each designed to suit different business types and sizes. Selecting the right one can help reduce administrative burden and maximise financial benefits for your business

Choosing the Right VAT Scheme for Your Business

There are several VAT schemes available to sole traders and companies in the UK, each designed to suit different business types, turnover levels, and accounting preferences. The best option for your business will depend on factors such as your annual turnover, cash flow, and the sector you operate in. Schemes to be considered are:

Cash accounting scheme

Annual accounting scheme

Flat rate scheme

If you don't get it right then you could be wasting time, resources and money.

Cash Accounting Scheme: A Simple Way to Manage VAT

The Cash Accounting Scheme offers a straightforward approach to handling VAT, especially for businesses looking to improve cash flow. Under this scheme, you only pay VAT once your customer pays their invoice, and you can reclaim VAT on purchases once you've paid your suppliers.

To join the scheme, your business must have an annual turnover of £1.35 million or less. If your turnover exceeds £1.6 million, you’ll need to leave the scheme and switch to a different VAT accounting method.

This option can be particularly helpful for businesses that experience delays in receiving payments, as it ensures you’re not paying VAT upfront before income is received.

Flat Rate VAT Scheme: Simplify Your Tax Without the Hassle

The Flat Rate Scheme is designed to make VAT accounting easier for small businesses. Instead of calculating VAT on every sale and purchase, you pay a fixed percentage—based on your industry—on your VAT-inclusive turnover.

You still charge 20% VAT on your invoices, but you don’t need to track how much VAT you’ve charged or reclaim on purchases. This streamlined approach can significantly reduce your admin workload.

If your business spends less than 2% of its VAT-inclusive turnover on goods, or less than £1,000 per year, HMRC considers you a “limited cost trader.” In this case, you must pay a flat rate of 16.5%, regardless of your sector. This rule helps ensure the scheme remains fair and balanced.

You can check whether you fall into this category and see which goods qualify using the HMRC guidance. To find the flat rate percentage for your specific industry, refer to the official VAT table.

To join the Flat Rate Scheme:

- Your VAT turnover must be £150,000 or less (excluding VAT)

- You cannot reclaim VAT on purchases, except for capital assets over £2,000

This scheme can be a practical option for businesses seeking to simplify VAT reporting—just be sure to assess whether it’s financially right for you.

Annual Accounting VAT Scheme: Fewer Returns, Less Admin

The Annual Accounting Scheme offers a simplified way for businesses to manage VAT. Instead of filing quarterly returns, you submit just one VAT return per year, helping to reduce paperwork and free up time for other priorities.

While the scheme eases administrative burden, it also means you can only reclaim VAT on purchases once a year—when you file your annual return. If your business regularly reclaims VAT or relies on frequent rebates, this scheme may not be the best fit.

On the flip side, you’ll only need to pay your VAT bill once a year, which can help with cash flow planning for some businesses.

To join the Annual Accounting Scheme:

- Your VAT-taxable turnover must be £1.35 million or less

- You must leave the scheme if your turnover exceeds £1.6 million

This scheme is ideal for businesses looking to streamline VAT reporting, provided they’re comfortable with annual-only VAT reclaims and payments.

We can help you

Choosing the right VAT scheme can make a big difference to your business and the amount of admin you need to do, and if you’re not sure which scheme would be right for you, then please contact us and we will do everything we can to assist you.

Children born in 2007 are able to access Child Trust Funds from September

Posted on 12th September 2025 at 09:50

Child Trust Funds: Fifth Cohort Gain Access This September

Young adults born on September 1, 2007 will be able to access their Child Trust Funds (CTFs) for the first time this September, as they officially turn 18.

CTFs were introduced by the UK Government to help families—especially those on lower incomes—build savings for their children’s future. The scheme began for children born on or after September 1, 2002, making this year’s group the fifth cohort to benefit from the initiative.

The first accounts were opened in January 2005, when providers began setting up funds and distributing government-funded vouchers to kickstart each child’s savings journey.

As these young adults come of age, they now have the opportunity to take control of their funds—whether to invest further, support education, or take their first financial steps into adulthood.

What Did the Government Pay Into Child Trust Funds?

Between September 1, 2002 and January 2, 2011, the UK Government made financial contributions to support children’s savings through Child Trust Funds (CTFs).

At birth, every eligible child received a £250 voucher paid into a CTF account. Families receiving the full Child Tax Credit were granted an additional £250, bringing the total to £500 for children from the lowest-income households.

Some children also received a top-up voucher at age seven, but eligibility varied over time:

- Children born between September 1, 2002 and July 31, 2010 received both the birth voucher (£250 or £500) and the age seven voucher.

- Children born on or after August 1, 2010 did not receive the age seven payment.

The scheme was discontinued on January 1, 2011, meaning children born after that date did not receive any CTF vouchers.

These contributions were designed to give every child a financial foundation—and for many, they’ve grown into a meaningful resource as they reach adulthood.

Can You Add Money to a Child Trust Fund?

Yes—you can! Contributions to a Child Trust Fund (CTF) have always been allowed, and they still are. Up to £9,000 per year can be added to the account until the child turns 18.

In CTF terms, a “year” runs from the child’s birthday to the day before their next birthday. It’s important to note that any unused portion of the £9,000 allowance does not roll over—if it’s not used within that year, it’s lost.

Until age 18, the CTF grows tax-free. From age 16, the child can take control of the account—meaning they can manage how it’s invested—but they cannot withdraw the funds until they turn 18.

Once they reach 18, they have two options:

- Cash in the fund and use the money however they choose

- Transfer it into an adult Individual Savings Account (ISA), allowing the investment to continue growing

At this point, the original CTF account will be closed, and the young adult takes full ownership of their financial future

Forgotten Where Your Child’s CTF Was Opened?

If you know which provider managed your child’s Child Trust Fund (CTF), you can contact them directly. This is especially important when your child turns 16 and wants to take control of the account, or at 18, when they’re eligible to withdraw the funds.

Not sure who the provider is? No problem—you can use the Gov.uk online search tool to locate the account. To use the tool, you’ll need:

- Your National Insurance number

- The child’s full name and date of birth

- The child’s National Insurance number, if available, to help narrow the search

Children who were in local authority care were also eligible for a CTF. If this applies to you or someone you know, it’s worth checking whether a fund exists.

On average, CTFs hold around £2,000 when accessed at age 18. However, children whose families made regular contributions could have significantly more. Regardless of the amount, this money is waiting to be claimed by anyone born within the eligible years.

Posts from September 2025