Do i have to be VAT registered if earning maximum £5000 a year?

The word "earn" usually refers to your net profit. VAT registration is based on turnover, which is your total income. You have to register for VAT if your annual turnover is, or is expected to be, £73,000 or more. You can voluntarily register at any time - its usually to your financial advantage if you sell goods to other businesses, otherwise it does not make that much difference one way or the other, so for the hassle involved its probably easier not to if you don't have to.

I suspect that you won't need to register but if you might if you have a very low profit margin.For example, if you have turnover of £100,000 but expenses of £95,000, then you would have profit of only £5,000 but you would need to register for VAT because of your high turnover.

I think the HMRC website is reasonably clear. Have a look at: http://www.hmrc.gov.uk/vat/start/register/when-to-...

As most answers suggest, it is your turnover which decides. You may be earning £0 or £5000 but if your turnover (sales) is over £73000 you MUST register for VAT. You can voluntarily register for VAT if your t/o is below the threshold.

You must be running a business (either as an individual or a company) and you must be trading in VATable goods or services.

From http://www.hmrc.gov.uk/vat/start/register/when-to-...

"Supplying goods or services within the UK. If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £73,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration see the section later in this guide for more information. "

Turnover is SALES. Deduct cost of sales (what you buy for the business)= Gross Profit (or what you call earnings. Deduct from this administration costs and you get Net Profit (again what you might call earnings). If the business makes a profit of £5000 p.a. then you need to pay N.I. basic. You should inform HMRC that you are self employed and they will sort out the N.I. and your self assessment forms.

And keep a seperate bank account for the business.

Last time I looked the turnover threshold was £77'000. You will have to register for Self Assesment (trading for gain you MUST) but read the HMRC website and register for SA thye day you start to trade.

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as far as i know you have to earn over 78000 before you are liable for vat hope this helps ,and good luck with your Business

No;- you are well below the limit. It is calculated on turnover though - not profit.