It’s one of the most common questions business owners ask us: “I’ve paid VAT on something for my business, why can’t I claim it back?” The short answer is simple: if you’re not VAT-registered, you can’t reclaim VAT. 

The longer answer, however, is worth understanding, especially if you’re close to the VAT threshold or wondering whether it’s time to register. And that’s what this article is all about. 

Here’s a quick breakdown of what you need to know.

What is VAT and who pays it?

VAT (Value Added Tax) is a tax added to most goods and services sold in the UK. The standard rate is currently 20%, and it’s built into the price of almost everything you buy as a business. However, there are a few different services or products that have different VAT rates which can catch you out. For example, energy and power is not at 20% for VAT.

If you’re not VAT-registered, you still pay VAT on those purchases, but you can’t reclaim it. That might seem unfair, but it’s how the system is designed. Only VAT-registered businesses can offset the VAT they’ve paid against the VAT they’ve charged.

Why can’t you reclaim VAT without registering

HMRC rules are clear: you can only reclaim VAT if you are registered for VAT. If you’re not, the VAT you pay is treated in the same way as any other business cost.

That means:

• You can’t claim VAT on purchases, even if they’re 100% for business use.
• You can include the full cost (VAT included) as a business expense in your accounts.
• You can’t retroactively reclaim VAT once you register, unless those purchases fall within specific pre-registration rules (more on that shortly).

It’s a common misconception that you can keep receipts and “backdate” claims once you eventually register. In most cases, this isn’t allowed.

The exception (for some non-business organisations)

There is one exception, but it doesn’t apply to most small businesses.

Some non-business organisations, like certain charities or government bodies, may be able to apply for VAT refunds even if they aren’t registered. This process is separate and requires approval from HMRC. For more information, check if you can claim a VAT refund as an organisation not registered for VAT.

If you’re a typical business trading goods or services, this exemption won’t apply to you.  

Should you register for VAT?

You must register for VAT if your business turnover exceeds £90,000 in any 12 months (as of 2025). You can also voluntarily register before hitting the threshold.

Registering can:

• Allow you to reclaim VAT on eligible business expenses
• Improve your business credibility
• Make your business seem more established (some clients prefer dealing with VAT-registered suppliers)

What if you’re close to registering?

If you think you’ll become VAT-registered soon, it’s smart to:

• Keep detailed records of your purchases and invoices
• Hold on to VAT receipts for eligible expenses
• Speak to your accountant about pre-registration VAT claims. In some cases, you can claim for:
  
  • Goods bought up to four years before registering
  • Services bought up to six months before registering
    (As long as they’re still in use and relate to your business)

Understand the rules and plan for growth

If you’re not VAT-registered, reclaiming VAT isn’t an option, no matter how many receipts you’ve saved. While that can feel frustrating, especially in the early days of running a business, understanding the rules now can help you make smarter decisions as you grow.

Thinking about registering? Or just want to make sure you’re claiming everything you can? We can help ease the pressure in many areas when it comes to tax, VAT, staff and making sure you have the finances to support your growth plans.

Get in touch. We’d love to chat and see if we can help.