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You’re not quite losing £19k overnight. VAT doesn’t work as simply as taking 20% off your turnover.
If you keep charging £93k in total and that price now has to include VAT, the VAT element would be £15,500, leaving £77,500 before costs. You can also reclaim VAT on qualifying business expenses.
The bigger question is who your customers are. If you’re mainly B2B and they’re VAT registered, you can usually add VAT to your prices and they reclaim it, so the impact can be fairly limited. If you’re mainly B2C and can’t realistically put your prices up by 20%, that’s where crossing the threshold can hurt.
Also, the £90k threshold is based on VAT-taxable turnover over a rolling 12 months, so definitely get your accountant to confirm exactly when you crossed it and your registration date.
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@SwitchTraderX Looking at it, it might have been a couple of months back actually, so there’s a sting, but not as bad as I feared. And we’re as B2C as it gets so this it’s a bit of an issue, but we’ll just keep ploughing ahead.
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We hit £93,000 in the last month, and I’m only just realising this might be a bad thing. The accountants are understandably asking for more money, which is fine. But I’m not great at tax issues, and as far as I can see, we’re going to be worse off now we’ve crossed the threshold. Am I right in thinking we’re just losing an instant £19k, essentially taking us down to £74k? Plus the accountant fees and administrative burden.
Or is there more to it I’m missing?