VAT Registration Threshold UK — When You Must Register & How VAT Works
VAT is the tax most small businesses meet first — and the threshold catches many people by surprise, because it is based on a rolling 12 months, not the tax year. This guide explains the £90,000 threshold, when you must register, the VAT rates, and how VAT actually works in 2025/26.
What is the VAT registration threshold?
You must register for VAT if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. Taxable turnover means sales that are subject to VAT — including zero-rated sales at 0% — but not exempt sales.
The threshold rose from £85,000 to £90,000 on 1 April 2024, and it has stayed at £90,000 since, confirmed for 2025/26 and 2026/27.
There are two tests, and either one triggers registration:
- The backward test: your taxable turnover in the last 12 months went over £90,000.
- The forward test: you expect your taxable turnover to go over £90,000 in the next 30 days alone — for example, you have just signed a large contract.
If either test applies, you must register within 30 days of the end of the month in which you went over. Your VAT registration then starts from the beginning of the following month, or from the date you expected to go over.
What counts towards the £90,000?
Count all your taxable sales — standard-rated (20%), reduced-rated (5%) and zero-rated (0%). Zero-rated sales still count, because they are taxable at 0% — only exempt sales are left out.
Do not count sales that are outside the scope of VAT, or sales of capital assets you are disposing of.
The three VAT rates
| Rate | Applies to |
|---|---|
| 20% standard | Most goods and services |
| 5% reduced | Domestic fuel and power, children’s car seats, some energy-saving materials |
| 0% zero-rated | Most food, books, newspapers, children’s clothing and footwear |
Zero-rated is not the same as exempt. If your sales are zero-rated, you charge 0% VAT but you can still reclaim the VAT you paid on your purchases. If your sales are exempt, you charge no VAT and you generally cannot reclaim VAT on related purchases.
How VAT works once you are registered
VAT is not a cost to your business in the normal way — you collect it for HMRC:
- You charge VAT on your sales (output VAT) and add it to your prices.
- You reclaim VAT on most business purchases (input VAT).
- Every quarter (usually) you pay HMRC the difference: output VAT minus input VAT.
Example: you sell £12,000 of services in a quarter (including £2,000 VAT) and you paid £600 VAT on business purchases. You pay HMRC £1,400.
You cannot charge VAT until you are registered — and you must show your VAT number on your invoices.
What happens if you register late?
HMRC can charge you VAT on sales from the date you should have registered, plus penalties and interest. That is why the rolling 12-month test matters: check your turnover every month, not once a year.
VAT schemes that make it simpler
Flat Rate Scheme
Instead of tracking VAT on every purchase and sale, you pay HMRC a fixed percentage of your gross turnover and keep the difference. You can join if your expected taxable turnover is £150,000 or less (excluding VAT) in the next 12 months. You must leave once your gross turnover passes £230,000. The percentage depends on your sector — for example, accountancy and book-keeping is 14.5% (13.5% in the first year, with the 1% first-year discount). A limited cost trader — one that spends very little on goods — pays 16.5% whatever its sector.
Cash Accounting Scheme
You account for VAT when you are paid, not when you invoice. This helps cash flow if your customers pay slowly. You can use it if your estimated taxable turnover is £1.35 million or less.
Annual Accounting Scheme
You make advance payments during the year and file one VAT return a year, instead of four.
Can you register voluntarily?
Yes. Even below £90,000, you can register voluntarily — and many businesses do, because:
- You can reclaim VAT on your purchases and start-up costs.
- It can make your business look more established to larger customers.
- If your customers are mostly VAT-registered businesses, they reclaim the VAT you charge, so it costs them nothing extra.
The downside: your prices to non-VAT-registered customers go up by 20%, and you take on quarterly VAT returns and Making Tax Digital for VAT record-keeping.
Deregistration — the £88,000 threshold
You can deregister if your taxable turnover falls below £88,000 in a 12-month period. You must tell HMRC within 30 days if you stop trading, stop making taxable supplies, or join a VAT group.
What to check now
- Add up your taxable turnover for the last 12 months — not just this tax year.
- If it is near £90,000, check it monthly.
- If you have signed a contract that will push you over £90,000 in the next 30 days, you must register now.
- If you are already registered, check whether the Flat Rate or Cash Accounting scheme would suit you better.
Frequently asked questions
What is the VAT registration threshold for 2025/26?
£90,000 of taxable turnover in any rolling 12-month period.
Do zero-rated sales count towards the threshold?
Yes. Zero-rated sales are taxable at 0%, so they count. Only exempt sales are left out.
How long do I have to register once I go over £90,000?
Within 30 days of the end of the month in which you went over.
Can I charge VAT before I am registered?
No. You can only charge VAT once you are registered, and you must show your VAT number on invoices.
What is the Flat Rate Scheme?
A simplified scheme where you pay HMRC a fixed percentage of your gross turnover instead of tracking VAT on every transaction. You can join at £150,000 turnover or less.
Read next: Self Assessment Tax Return UK 2025/26 — Deadline, Who Must File & How to File, Allowable Expenses for Self-Employed in the UK — What You Can Claim and Limited Company vs Sole Trader in the UK — Which Pays Less Tax?.
This article gives general information about UK tax, not personal financial or tax advice. Tax rules can change, and your situation may be different. Check GOV.UK or speak to a qualified accountant before you act.
