HMRC has introduced a new digital tool designed to assist small businesses in evaluating the potential impact of VAT registration. The VAT Registration Estimator, launched on 10 July, allows new and established businesses to experiment with various financial inputs and outputs to understand the implications of VAT registration on their profits.

Accessible via the HMRC website, the tool requires businesses to input details about their turnover, business income, and costs, including applicable VAT rates. The estimator then guides users through several fields to determine whether VAT registration is necessary and what the financial impact might be. This tool provides valuable insights without recording any inputted data, ensuring user privacy.

The VAT registration estimator also offers links to additional information about the VAT registration process and guidance for businesses considering voluntary registration below the threshold. However, HMRC notes that the tool cannot provide personalised business advice.

Businesses are advised to allocate approximately 20 minutes for the estimator's initial use and have the relevant financial information ready. The tool supports various VAT rates and allows users to decide whether to add VAT to their prices or absorb them. Results can be saved and printed for future reference.

To further assist users, HMRC will host a live webinar on 24 July, explaining how to use the tool. Details of the webinar can be found on the HMRC VAT guidance pages.

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