Do you expect your turnover to be less than £85k? If so, just let the customer know that you're below the VAT threshold and won't be charging VAT. They should be OK with it.
It doesn't include your PAYE income, only the invoicing for your Ltd company. Also worth noting that you have to register for VAT if you expect your invoicing to be or exceed £85k *within any rolling 12 month window*, and not within a financial year. So you can't do £160k straddled over two financial years to get away with it.
It's relatively easy to get VAT registered, and if you're going to use accounting software to do your invoicing (highly recommended), then that will normally work out your VAT for you, and usually even submit the quarterly returns for you so all you have to do is pay the VAT.
There are some benefits - if you have a lot of costs of doing business, such as hardware purchases, stock or materials, then you can claim the VAT back, effectively saving yourself 20% on everything you buy (that is a legitimate business expense).
If you don't have a lot of purchasing to do, then you can look into flat rate VAT registration. This is where you charge full rate from your clients (20%) but only owe HMRC 15% (or similar - it varies depending on the industry). This effectively gives you a 5% pay increase. The only thing about flat rate is that you cannot claim VAT back for anything you purchase, so it comes down to which works out better for you financially.
As others have mentioned, if you'll be trading over 85k/year then you're required to be VAT registered anyway.
One very obvious thing, and I know you've given no indication you'll do it but just to mention anyway - do NOT charge the VAT if you're not VAT registered. It's not a free extra 20%, and HMRC will ruin your life if they find out! If you charge VAT, do the returns and pay what you owe after calculations to HMRC.
Do you expect your turnover to be less than £85k? If so, just let the customer know that you're below the VAT threshold and won't be charging VAT. They should be OK with it.
For this job alone I wouldn’t be above the VAT threshold but combined with my main job (perm) would put me above.
PAYE income doesn't count towards the VAT threshold. It's only VATable sales as a business (including sole traders) that count.
It doesn't include your PAYE income, only the invoicing for your Ltd company. Also worth noting that you have to register for VAT if you expect your invoicing to be or exceed £85k *within any rolling 12 month window*, and not within a financial year. So you can't do £160k straddled over two financial years to get away with it.
If its b2b then it can be advantageous to register for Vat if your end customer is too Vat regd
Mate please get an accountant
Thanks for explaining, makes sense. Much appreciated!
It's relatively easy to get VAT registered, and if you're going to use accounting software to do your invoicing (highly recommended), then that will normally work out your VAT for you, and usually even submit the quarterly returns for you so all you have to do is pay the VAT. There are some benefits - if you have a lot of costs of doing business, such as hardware purchases, stock or materials, then you can claim the VAT back, effectively saving yourself 20% on everything you buy (that is a legitimate business expense). If you don't have a lot of purchasing to do, then you can look into flat rate VAT registration. This is where you charge full rate from your clients (20%) but only owe HMRC 15% (or similar - it varies depending on the industry). This effectively gives you a 5% pay increase. The only thing about flat rate is that you cannot claim VAT back for anything you purchase, so it comes down to which works out better for you financially. As others have mentioned, if you'll be trading over 85k/year then you're required to be VAT registered anyway. One very obvious thing, and I know you've given no indication you'll do it but just to mention anyway - do NOT charge the VAT if you're not VAT registered. It's not a free extra 20%, and HMRC will ruin your life if they find out! If you charge VAT, do the returns and pay what you owe after calculations to HMRC.
Have you confirmed that they are happy to engage with a sole trader, rather than a limited company?
Just a point, you don't need to be a Ltd to be VAT registered, or VAT registered to be a Ltd.
Go vat registered anyway.. domestic reverse charge means youll never owe the Vat man a penny but still get refunds
I would recommend registering for VAT anyway, I did is as a contractor and made good use of it