How to register for corporation tax and vat

Getting Started with HMRC

The Bottom Line: You must register for Corporation Tax within three months of starting to trade, and while VAT registration is only compulsory when your taxable turnover hits £90,000, registering early can save you money on your initial business expenses.

How to Register for Corporation Tax

Once you have formed your Limited Company, HMRC will usually send a letter to your registered office address with your Unique Taxpayer Reference (UTR). However, the responsibility is on you to register for Corporation Tax within three months of "starting to trade." Trading includes buying, selling, renting property, or even advertising your new software.

To complete this, you will need:

• Your company's 10-digit UTR (found on the letter from HMRC).
• Your company’s registration number (CRN) from Companies House.
• The date you started trading.
• The date your annual accounts will be made up to.

You can do this entirely online via the Government Gateway. Once registered, you will use this account to file your annual Company Tax Returns and pay any tax due on your profits.

Navigating VAT Registration

Value Added Tax (VAT) is a tax placed on the sale of goods and services. You are legally required to register if your VAT-taxable turnover exceeds £90,000 over a rolling 12-month period. If you expect to go over this limit in the next 30 days alone, you must register immediately.

Should You Register Voluntarily?

Many SaaS founders register for VAT even if they haven't reached the threshold yet. This is known as voluntary registration. Here is why you might consider it:

• Reclaiming Expenses: You can claim back the VAT you pay on business purchases like laptops, cloud hosting fees, and office equipment.
• Professionalism: Having a VAT number can make your startup look more established to corporate B2B clients.

However, there is a trade-off: you will have to charge VAT on your sales, which might make your software look 20% more expensive to non-VAT registered customers (like individual consumers).

VAT on Digital Services

Since you are building a digital product, you need to be aware that the rules for "digital services" are specific. If you sell to consumers in the UK, you charge UK VAT. If you sell to consumers in the EU, you may need to account for VAT in their specific country. Many modern payment platforms can assist with calculating these rates, but having your own VAT registration is the first step in formalising your tax relationship with HMRC.

Best Practices

Keep your Government Gateway login details in a very safe place, ideally a password manager. Missing a tax deadline can result in automatic fines that increase the longer you leave them. If you are unsure about when your "trading" actually began, it is usually safer to register as soon as you open a business bank account or start spending money on your product development.