The VAT registration threshold is one of the most important numbers for a growing UK business. Cross it, and you must register for VAT, charge VAT on your sales and start filing VAT returns. Miss it, and you can end up owing backdated VAT and facing a penalty.
This guide explains the £90,000 rule: how the threshold is tested, what counts towards it, the 30 days you have to register, and when voluntary registration might make sense.
What Is the VAT Registration Threshold?
You must register for VAT if your taxable turnover goes over £90,000. Taxable turnover means the total value of everything you sell that is subject to VAT — including standard-rated, reduced-rated and zero-rated supplies — but not including VAT itself.
The key point is how that £90,000 is measured. It is not based on the tax year, and not based on your accounting year. It is based on a rolling 12-month period, so it can catch a business at any point in the year.
How the Rolling 12-Month Test Works
At the end of every month, add up your taxable turnover for the previous 12 months. If that total is more than £90,000, you have exceeded the VAT registration threshold and must register.
For example, if your taxable turnover for the 12 months to 30 September 2026 comes to £91,000, you must register for VAT. It does not matter that your turnover in the financial year so far may be far lower, or that the previous tax year was below the threshold — the rolling 12 months are what count.
There is also a second test based on the future: if you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register. This often applies to a business that has just won a large contract.
The Deregistration Threshold
If your turnover falls, you may be able to deregister. The deregistration threshold is £88,000 of taxable turnover. If your taxable turnover falls below this figure, you can apply to cancel your VAT registration.
Deregistration is not automatic, and it is not always the right choice — for example, if you regularly reclaim more VAT on purchases than you charge on sales, staying registered may still be better. It is worth getting advice before cancelling.
You Have 30 Days to Register
Once you exceed the VAT registration threshold, you have 30 days from the end of the month in which you exceeded it to register with HMRC. Using the example above, if you went over £90,000 in the 12 months to 30 September 2026, you must register by 30 October 2026. Your effective date of registration would be 1 November 2026, and you would charge VAT on your taxable sales from that date.
If you register late, HMRC can charge you the VAT you should have accounted for from your proper registration date, plus a penalty. That is why tracking your turnover every month matters.
What Counts Towards the Threshold?
Not all of your income counts towards the £90,000 test. In general:
- Taxable supplies — standard-rated, reduced-rated and zero-rated — count.
- Exempt supplies, such as most property rents, most financial services and some education and healthcare, do not count.
- The sale of capital assets, such as selling a van or equipment your business no longer needs, is generally excluded.
- VAT itself is not included in your turnover figure.
If you make a mix of taxable and exempt supplies, you will need to separate them carefully when checking the threshold.
Voluntary Registration: The Pros and Cons
You can register for VAT voluntarily, even below the VAT registration threshold. It may be worth considering if your customers are mainly VAT-registered businesses, or if you buy a lot of goods and services on which you pay VAT.
Advantages: you can reclaim the VAT you pay on business purchases and expenses; some customers see a VAT-registered business as more established; and your prices may look keener to VAT-registered customers who can reclaim the VAT themselves.
Disadvantages: your prices become 20% higher for customers who cannot reclaim VAT, such as private individuals; and you take on the administration of keeping VAT records and filing returns.
Making Tax Digital for VAT
Once you are registered, you must follow the Making Tax Digital for VAT rules. That means keeping digital VAT records and submitting your VAT returns using MTD-compatible software. Returns are usually filed quarterly, and your VAT is normally due one calendar month and seven days after the end of the quarter.
Penalties for Late Registration
Registering late can be expensive. HMRC will charge the VAT that should have been accounted for from the date you should have registered, and can also charge a penalty based on the amount of VAT involved, how late the registration was and the reason for the delay. The sooner you register after realising you have gone over the threshold, the better.
Practical Steps to Stay on Top of VAT
- Track your turnover every month. Keep a running 12-month total of taxable turnover, and review it at each month end.
- Set an alert at £85,000. When your rolling total approaches the threshold, you have time to plan — and to register promptly if you cross it.
- Separate taxable and exempt income. Make sure your records distinguish taxable supplies from exempt ones, so your test is accurate.
- Register promptly. Once you go over the threshold, register within the 30-day deadline, and update your invoices and pricing from your effective registration date.
- Set up MTD-compatible software. Choose software that keeps digital VAT records and submits returns to HMRC.
Related reading: Keeping records straight is essential once you are VAT-registered — our guide to bookkeeping basics for UK small businesses explains what to keep and how long to keep it.
Related reading: Our guide to VAT schemes compared explains the standard, flat rate, cash accounting and annual accounting schemes.
Frequently Asked Questions
Is the £90,000 VAT registration threshold based on the tax year?
No. It is based on a rolling 12-month period, tested at the end of every month. That means you can cross the threshold in any month of the year.
Once registered, do I charge VAT on all my sales?
You charge VAT on your taxable supplies. Exempt supplies remain exempt, and you should not charge VAT on them.
Can I deregister for VAT if my turnover drops?
Yes. If your taxable turnover falls below the £88,000 deregistration threshold, you can apply to cancel your registration. Check first whether staying registered would still benefit you.
Can I register for VAT voluntarily if I am below the VAT registration threshold?
Yes, voluntary registration is allowed. It can make sense if you regularly reclaim VAT on your purchases, or if your customers are VAT-registered businesses.
How We Can Help
VAT is one of the areas where an early mistake can be costly, from missing the registration date to charging VAT incorrectly. Financial Accounting Firm helps businesses monitor their turnover, register for VAT and stay compliant with Making Tax Digital. Contact us if you would like help with VAT for your business.
This article is general information only and should not be taken as personal tax or financial advice. Tax rules can change, and your position will depend on your own circumstances.
