UK VAT Registration Threshold: When You Must Register and How

Registering for VAT at the right time matters. Register late and you can owe HMRC VAT you never charged your customers, plus penalties. Here's how the threshold works.

What is the VAT registration threshold?

At the time of writing, a UK business must register for VAT if its VAT-taxable turnover goes over £90,000. The threshold rose from £85,000 on 1 April 2024. The deregistration threshold is £88,000. Thresholds can change, so always check the current figures on GOV.UK.

The rolling 12-month test

The threshold isn't based on your financial year. At the end of every month, look back over the previous 12 months. If your taxable turnover in that rolling period has gone over the threshold, you must tell HMRC within 30 days of the end of that month. Your registration then takes effect from the first day of the second month after the month you went over.

The 30-day look-ahead test

There's also a forward-looking test. If you expect your taxable turnover to go over the threshold in the next 30 days alone, for example because you've won a large contract, you must register by the end of that 30-day period, and your registration is effective from the start of it.

What counts as taxable turnover

Taxable turnover is the total of everything you sell that isn't exempt from VAT, including zero-rated items. Exempt sales, such as most insurance and certain financial services, don't count towards the threshold.

Voluntary registration

You can register for VAT before reaching the threshold. It lets you reclaim VAT on your costs, which can make sense if your customers are mostly VAT-registered businesses who can reclaim the VAT you charge them. If you sell mainly to consumers, registering early effectively raises your prices or cuts your margin, so weigh it carefully.

What changes once you're registered

You'll charge VAT on taxable sales, issue VAT invoices, reclaim VAT on eligible purchases and submit VAT returns, usually quarterly, through Making Tax Digital-compatible software. Returns and payment are normally due one month and seven days after the end of each VAT period. Getting the VAT treatment of each transaction right every month is far easier than correcting a year of errors later.

Choosing a VAT scheme

Smaller businesses may benefit from schemes such as the Flat Rate Scheme, Cash Accounting or Annual Accounting. Each changes how and when you account for VAT, and the right one depends on your margins, customers and cash flow.