VAT registration threshold: What it means for your UK business

Published Thursday 8 January 2026

Table of contents

• What is value added tax (VAT) and the VAT registration threshold?
• When do you need to register for VAT?
• How to calculate your turnover for VAT
• Latest updates on VAT registration thresholds
• What to do if you exceed the VAT threshold
• How to register for VAT
• Managing your VAT with Xero
• FAQs on VAT registration thresholds

Key takeaways

• Monitor your business turnover monthly using the rolling 12-month rule, as you must register for VAT within 30 days if your taxable turnover exceeds £90,000 in any 12-month period or if you expect it to exceed this threshold in the next 30 days alone.
• Consider voluntary VAT registration before reaching the £90,000 threshold to reclaim VAT on startup costs like office equipment, professional services, and initial stock purchases, which can save hundreds or thousands of pounds in your first year.
• Calculate your VAT-taxable turnover accurately by including all sales of goods and services at standard, reduced, and zero rates, plus hired or loaned goods, business goods used personally, and bartered items, while excluding VAT-exempt sales and capital asset disposals.
• Register for VAT online through HMRC within the required timeframe, gathering essential information including your National Insurance number, business bank account details, trading history, and business address to complete the 10-15 minute process.

What is value added tax (VAT) and the VAT registration threshold?

Value added tax (VAT) is the tax added to most products and services in the UK.

The UK VAT registration threshold is the annual turnover level at which your business must register for VAT. This threshold is currently £90,000 for the 2025 tax year, making it the highest threshold in the Organisation for Economic Co-operation and Development (OECD) alongside Switzerland.

VAT-taxable turnover includes all revenue from goods or services that are not VAT-exempt. Once you exceed this threshold, you have 30 days to register and take on new responsibilities:

• Charge VAT on your goods or services

• Submit VAT returns to His Majesty’s Revenue and Customs (HMRC)

• Maintain detailed VAT records

Calculating the necessary VAT depends on the category your products or services fall into. Most goods and services fall within the 20% VAT rate, although some products and services, like books, children's clothing and education, are partially or fully exempt.

Current VAT registration thresholds in the UK

Current VAT registration threshold: £90,000 (from 1 April 2024)

The threshold changes regularly to reflect economic conditions. Recent thresholds include:

• 2024–2026: £90,000 (current)
• 2018–2023: £85,000
• 2016–2018: £83,000
• 2015–2016: £82,000
• 2014–2015: £81,000

Monitor HMRC announcements for future changes that could affect your business.

Impact of VAT registration on your business

When you exceed the VAT threshold, you have 30 days to register with HMRC. This triggers new responsibilities:

Financial obligations:

• Charge VAT on your goods and services
• Pay VAT on purchases from VAT-registered suppliers

Administrative requirements:

• Submit VAT returns (quarterly or annually)
• Maintain detailed VAT records and accounts
• Display your VAT number on invoices

Registering voluntarily for VAT

Voluntary VAT registration lets you register before reaching the £90,000 threshold. This can benefit your business in two key ways:

1. Cost advantage: Your prices become more competitive because VAT-registered customers can reclaim the VAT you charge them.

2. Startup savings: Register early to reclaim VAT on:

• Office equipment and furniture
• Professional services (legal, accounting)
• Marketing and website costs
• Initial stock purchases

This can save hundreds or thousands in your first year.

When do you need to register for VAT

Knowing when to register for VAT is key to staying compliant. There are two main rules to keep an eye on:

• The backward look: You must register if your total VAT-taxable turnover for the last 12 months was over £90,000. This isn't about the tax year; it's a rolling 12-month period. You should check your turnover at the end of every month.
• The forward look: You must register if you expect your total VAT-taxable turnover to go over £90,000 in the next 30 days alone. This applies if you land a large contract, for example.

Once you know you need to register, you have a deadline to meet, so it's important to act promptly.

How to calculate your turnover for VAT

To see if you're near the threshold, you need to calculate your VAT-taxable turnover. This is the total value of all goods and services you sell that are not exempt from VAT.

Your calculation should include:

• Sales of goods and services at the standard, reduced, and zero rates
• Goods you've hired or loaned to customers
• Business goods used for personal reasons
• Goods you've bartered, part-exchanged, or given as gifts

Don't include sales of goods or services that are VAT exempt, or sales of capital assets from your business.

Latest updates on VAT registration thresholds

Most recent VAT threshold changes:

Registration threshold: Increased to £90,000 (from £85,000)

• If your turnover is below £90,000, registration is not required; this change is estimated to benefit over 28,000 businesses who will no longer need to be VAT-registered.
• Voluntary registration remains available.

Deregistration threshold: Increased to £88,000 (from £83,000), which is the official turnover level that determines if a business can apply for deregistration.

• Existing VAT-registered businesses can deregister for VAT if turnover falls below this level.
• This change is useful for businesses experiencing reduced sales.

What to do if you exceed the VAT threshold

If your turnover crosses the VAT threshold, you must register with HMRC. You have 30 days from the end of the month in which you exceeded the threshold to submit your registration.

For example, if your turnover went over the threshold during May, you must register by 30 June. Your effective date of registration would be 1 July.

If you think your turnover will only temporarily go over the threshold, you can apply for a registration exception by writing to HMRC. You'll need to provide evidence showing why your future turnover will not exceed the deregistration threshold of £88,000.

How to register for VAT

VAT registration takes 10-15 minutes online through the HMRC website. You'll receive your VAT number within 2–3 weeks.

Required information:

• Personal details: National Insurance number or unique taxpayer reference (UTR)
• Business history: Details of any businesses owned in the past two years
• Banking information: Business bank account details
• Business details: Trading name, address, and start date

Complete registration on the HMRC register for VAT page or by post using form VAT1.

For the full step-by-step process, check out our guide on registering for VAT.

Managing your VAT with Xero

Managing VAT compliance becomes simpler with accounting software like Xero. It automates calculations and ensures accurate, timely submissions.

Xero VAT features:

• Automatic calculations: Tracks VAT on all transactions
• Scheme management: Handles different VAT accounting schemes
• Direct submission: Files returns straight to HMRC
• Real-time tracking: Shows your VAT position instantly

Regular monitoring prevents surprises and keeps your business on track. Explore Xero's comprehensive VAT features to make tax compliance easier and focus on growing your business.

Ready to streamline your VAT compliance? Try Xero for free and see how automated VAT management can save you time and reduce errors.

FAQs on VAT registration thresholds

Here are answers to some common questions about VAT registration thresholds.

Should I register for VAT if my turnover is under £90,000?

No, you don't need to register for VAT if your turnover is under £90,000. To figure out if voluntary registration is right for you, consider whether:

• Most of your clients are VAT registered themselves; if so, registering for VAT would give you an edge on your competitors
• Your new company will soon cross the threshold; if so, it's worth registering to reclaim the VAT on some of your startup costs

What is the UK VAT registration threshold for 2025?

The VAT registration threshold is currently £90,000. If your VAT-taxable turnover is below £90,000 in the 2025 tax year, you don’t need to register for VAT.

Who is exempt from VAT registration?

'Zero-rated' businesses, such as those in publishing and education, are exempt from VAT registration as outlined on the HMRC website. If all the goods or services you provide are exempt from VAT, you also do not have to register. If you're VAT registered and incur VAT on items used to make exempt supplies, your business is partly exempt.