Last updated: 14 October 2026
Does a VAT-registered sole trader have to charge VAT on a second business?
Yes. VAT registration covers the person, not the business. If you are a VAT-registered sole trader and you start a second business as a sole trader, all of your taxable sales from both businesses fall under the same VAT registration. You must charge VAT on the second business too, even if its own turnover is well under £90,000.
Why this happens
A sole trader and their businesses are the same legal “person” for VAT. HMRC adds together all of the taxable supplies you make. You cannot have two VAT numbers for two sole trader businesses, or keep one business unregistered.
Example
Priya runs a VAT-registered design business with £120,000 of turnover. She starts selling handmade candles as a sideline, with £15,000 of turnover. Because she is still the same sole trader, she must charge 20% VAT on her candle sales and include them on her VAT returns.
Ways to structure a second business
| Structure | VAT effect |
| Second business run by you as a sole trader | Covered by your existing VAT registration |
| Limited company | A separate legal person with its own £90,000 threshold |
| Partnership, with a genuine partner | A separate VAT person |
| Business owned by a spouse, genuinely run by them | Separate, if it is commercially real |
Watch out for “disaggregation”
HMRC can treat separate businesses as one if they have been split artificially to avoid VAT. It can direct that they be registered as one. Signs HMRC looks for include shared premises, staff, equipment, bank accounts and customers. Keep any separate businesses genuinely independent.
Can a different VAT scheme help?
The flat rate scheme applies to your whole VAT registration, so you would use one percentage for the main activity. Turnover must be no more than £150,000. Cash accounting might help cash flow if your customers pay late.
Should you deregister?
If your total taxable turnover is expected to fall below £88,000 in the next 12 months, you can apply to deregister. Otherwise, the second business stays inside your VAT registration.
Checklist before starting a second business
- Decide whether it will be run by you as a sole trader or through a new company
- Work out whether its sales are standard-rated, reduced-rated, zero-rated or exempt
- Update your invoices, prices and software so VAT is charged on the new sales from day one
- Keep separate income and cost categories in your bookkeeping, so you can see each business’s profit
- Review whether your current VAT scheme still suits your combined turnover
- Ask your accountant to check the effect on your Self Assessment and payments on account
Frequently asked questions
Can I set up a limited company for the second business to avoid VAT?
A genuinely separate company has its own threshold. HMRC can challenge artificial splits.
Do exempt sales count?
Exempt supplies don’t count towards the threshold, but they may affect how much input VAT you can reclaim.
What about letting a property?
Residential rent is exempt, so it doesn’t make you charge VAT. Commercial rent can be opted to tax.
Do I need to tell HMRC?
Update your business activity details on your VAT registration.
Related: how to register for VAT and accountants for sole traders.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT for multiple businesses. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
