Everything UK freelancers and sole traders need to know about VAT — registration thresholds, charging VAT on invoices, the Flat Rate Scheme, and Making Tax Digital.
You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period (2026 HMRC threshold). You have 30 days from when you exceed this threshold to register.
You can also voluntarily register below £90,000 — this lets you reclaim VAT on business purchases and may make you appear more professional to larger clients.
Once registered, you must add 20% VAT to your invoices. For example, if your day rate is £500 net, your VAT-inclusive invoice would show £600 total (£500 + £100 VAT).
Use our free UK VAT invoice generator to create HMRC-compliant invoices instantly.
The HMRC Flat Rate Scheme can simplify VAT for freelancers with turnover under £150,000. Instead of accounting for VAT on each transaction, you pay a fixed percentage of your gross (VAT-inclusive) turnover.
For example, IT consultants pay 14.5% of gross turnover — meaning on a £1,200 gross invoice you pay £174 VAT rather than £200. The difference (£26) is effectively additional income.
HMRC's Making Tax Digital requires VAT-registered businesses to keep digital records and submit VAT returns using MTD-compatible software. This applies to all VAT-registered businesses in the UK.
MTD-compatible options include Xero, FreeAgent (free with NatWest/RBS), QuickBooks, and Sage.
Create HMRC-compliant VAT invoices for free — no signup required.
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