The VAT threshold is currently £70,000. If your annual TURNOVER (not your profit) is already over that limit, or if you think that it is soon likely to be so, you need to register for VAT.
Then you need to keep records of all your purchases and sales, noting the VAT on each transaction.
For example, let's suppose that you buy an item for £20 + VAT (which, at 20%, is £4).
You need to show the £20 and £4 separately in your expenditure account.
You have to pay the supplier £24 but you'll be able to reclaim £4 from HMRC.
Later you sell that item, at a profit, for £30 + VAT, thus charging the buyer £30 + £6 = £36.
Again, you need to show the £30 and £6 separately in your income account, as you'll have to pay £6 to HMRC.
If your turnover doesn't reach £70,000 you can simply ignore VAT altogether (since you can't reclaim it but you don't have to pay it either) and enter your gross expenditure and income into your account. (i.e.for my example above, you'll simply show your expenditure as £24 and your income as £36).
Chris