The VAT registration threshold is one of those figures every business owner half-remembers and nobody’s quite sure whether it’s changed recently. It has, relatively recently, and how it’s actually tested trips people up more than the number itself.
The current threshold
You must register for VAT once your taxable turnover (everything you sell that isn’t VAT-exempt or outside the scope of VAT) goes over £90,000 in any rolling 12-month period. This rose from £85,000 on 1 April 2024, and it’s stayed at £90,000 since, surviving both the Autumn 2025 Budget and the Spring 2026 Statement without change.
There’s a separate, lower deregistration threshold of £88,000. If your turnover falls below this and you expect it to stay there, you can apply to come out of the VAT system, though deregistering isn’t automatic and is worth thinking through rather than doing reflexively.
How the test actually works: it’s not a tax-year test
This is the part that catches people out. The £90,000 threshold isn’t measured from April to April. It’s a rolling 12-month look-back. At the end of every month, you look at your total taxable turnover for the trailing 12 months, and if it’s gone over £90,000, you’re required to register.
Worked example: say your rolling turnover passes £90,000 on 15 July. You have 30 days from the end of the month you went over to register, so by 30 August. Your registration then takes effect from 1 September, the first day of the second month after you crossed the threshold.
There’s also a second, separate test worth knowing about. If you can see turnover is about to exceed £90,000 in the next 30 days alone (a single large contract landing, for instance), you have to register immediately, with your effective date being the date you realised, not the date turnover actually crosses the line. This forward-look test exists specifically so a business can’t argue it didn’t need to register yet because the rolling 12-month figure hadn’t technically caught up.
What happens if you register late
If you go over the threshold and don’t register in time, HMRC will still expect VAT on everything you sold from the date you should have registered. That can mean owing VAT you never actually charged your customers, out of your own margin.
On top of that, a late-registration penalty can apply, calculated as a percentage of the VAT that went unpaid during the period you should have been registered. How much depends on whether HMRC judges it non-deliberate or deliberate, and whether you told them yourself or they found it: genuinely careless but honest late registration sits at the lower end, while deliberately avoiding registration and concealing it sits at the top end, up to the full amount of tax involved in the worst cases. Either way, the practical takeaway is the same: if you’re close to the threshold, it’s far cheaper to register a little early than a little late.
Should you register before you have to?
Voluntary registration, registering below £90,000 turnover, is allowed, and it’s a genuine judgement call rather than something to do automatically. The main benefit is that once registered, you can reclaim VAT on your own business purchases and costs, which matters more if you have significant VATable expenses. The trade-off is that once registered, you must charge VAT on everything you sell (unless it’s specifically exempt): fine if your customers are VAT-registered businesses who can reclaim it themselves, less fine if you’re selling to the general public, where your prices effectively rise by 20% relative to a competitor who isn’t registered.
A quick word on the Flat Rate Scheme
If you do register, the Flat Rate Scheme is still available for smaller businesses (entry requires expected turnover of £150,000 or less), and it simplifies VAT accounting by applying a single flat percentage to your gross turnover instead of tracking input and output VAT separately. One rule worth knowing if you’re considering it: businesses that spend very little on goods (the “limited cost business” test, broadly under 2% of turnover or under £1,000 a year) are pushed onto a 16.5% flat rate, which for many service-based businesses ends up costing more than standard VAT accounting would. Run the numbers before assuming the Flat Rate Scheme is the simpler, cheaper option. It isn’t always.
If you’re close to the threshold
Whether you’re approaching £90,000 and need to register, or sitting comfortably below it and weighing up voluntary registration, get an outside view before the decision gets made for you by a missed deadline. Our VAT and payroll service covers registration and ongoing returns, and if you sell across more than one channel, our e-commerce & multi-channel VAT guide covers how the threshold applies when your sales are spread across a website and marketplaces. Get in touch and we’ll tell you exactly where you stand.
Last reviewed: 19 August 2026. This is general guidance, not personalised advice. Rules and figures may have changed since publication, so please check with us before acting on it.
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