VAT registration threshold: when you need to register

Published Tuesday 21 April 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
• 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 rolling 12-month VAT-taxable turnover at the end of every month, and register with HMRC within 30 days of exceeding the £90,000 threshold to avoid penalties of up to 15% of VAT owed.
• Understand that both zero-rated and standard-rated sales count toward the £90,000 threshold, while VAT-exempt sales do not, so calculate your taxable turnover carefully to know when registration applies.
• Consider registering for VAT voluntarily before reaching £90,000 if most of your customers are VAT-registered businesses, as they can reclaim the VAT you charge, making your pricing more competitive and allowing you to reclaim VAT on your own business costs.
• Apply the forward-looking test as well as the backward-looking test: if you expect to exceed £90,000 in the next 30 days alone, such as when winning a large contract, you must register before those supplies begin.

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

The UK VAT registration threshold is £90,000 for the 2025/26 tax year. This is the annual turnover level at which your business must register for value added tax (VAT) with HMRC.

VAT is a tax added to most products and services sold in the UK. The UK threshold is the highest in the Organisation for Economic Co-operation and Development (OECD) alongside Switzerland, and is more than double their averages.

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 HMRC
• Maintain records of all VAT transactions

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 items such as books and children's clothing are zero-rated, while some supplies such as certain education services may be exempt.

Current VAT registration thresholds in the UK

The VAT thresholds changed on 1 April 2024. Here's what's different.

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

The threshold remains at £90,000 for the 2025/26 and 2026/27 tax years. It changes periodically to reflect economic conditions, though if it had been adjusted in line with inflation since 2016, it would have already reached £111,000.

Recent thresholds:

• 2024–2027: £90,000 (current)
• 2018–2024: £85,000
• 2017–2018: £83,000
• 2016–2017: £82,000
• 2015–2016: £81,000

Registration threshold changes: Over 28,000 businesses benefit from the increase from £85,000 to £90,000. Businesses with turnover below £90,000 no longer need to register. Voluntary registration remains available for any business.

Deregistration threshold: Now £88,000 (previously £83,000)

VAT-registered businesses can deregister if turnover falls below £88,000. This is useful for businesses experiencing reduced sales or seasonal dips.

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

Registering voluntarily for VAT

Voluntary VAT registration lets you register before reaching the £90,000 threshold. This can benefit certain businesses, and HMRC figures show that in 2020, 52% of VAT-registered taxpayers had a turnover below the limit and registered voluntarily.

Competitive pricing: VAT-registered customers can reclaim the VAT you charge. This makes your prices effectively lower for business-to-business (B2B) clients.

Recover startup costs: Register early to reclaim VAT on:

• office equipment and furniture
• professional services (legal, accounting)
• marketing and website costs
• initial stock purchases

Early registration can save hundreds or thousands of pounds in your first year.

What to consider: You'll need to charge VAT on all sales, submit regular returns, and maintain detailed records. If most customers are consumers who can't reclaim VAT, registration may make your prices less competitive. HMRC research found that 20% of unregistered businesses trading near the limit had taken action to remain below the VAT threshold.

When do you need to register for VAT

You must register for VAT if you meet either of two tests. Check both at the end of every month.

The backward-looking test: Rolling 12-month turnover

The backward-looking test checks whether your VAT-taxable turnover exceeded £90,000 in the past 12 months. This is a rolling period, not the tax year.

Here's how to apply this test:

1. Add up your VAT-taxable turnover for the last 12 months
2. Check this total at the end of every month
3. Register within 30 days of the end of the month if you exceed £90,000

Example: Your turnover from June 2024 to May 2025 totals £92,000. You must register by 30 June 2025, with an effective date of 1 July 2025.

The forward-looking test: 30-day turnover projection

The forward-looking test applies when you expect to exceed £90,000 in the next 30 days alone. This typically happens when you land a large contract or expect a significant revenue spike.

Follow these steps to apply the forward-looking test:

1. Estimate your expected turnover for the next 30 days
2. Register before you make the supplies if you'll exceed £90,000
3. Your registration takes effect from the date you expect to exceed the threshold

Example: You win a contract worth £95,000 starting 1 August. You must register before 1 August, with an effective date of 1 August.

How to calculate your turnover for VAT

VAT-taxable turnover is the total value of everything you sell that isn't VAT-exempt. Calculate this figure to check whether you're approaching the £90,000 threshold.

Count the following items toward your VAT-taxable turnover:

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

Don't count these items toward your threshold:

• VAT-exempt sales (such as insurance or education)
• Sales of capital assets from your business

Example: You sell £80,000 of standard-rated services and £15,000 of zero-rated goods. Your VAT-taxable turnover is £95,000, so you must register.

What to do if you exceed the VAT threshold

If your turnover exceeds £90,000, you must register with HMRC within 30 days from the end of the month you crossed the threshold, meaning your effective date of registration is the first day of the second month after you go over.

Here's how the registration timeline works in practice:

• Threshold exceeded: During May
• Registration deadline: 30 June
• Effective registration date: 1 July

From your effective date, you must charge VAT on all taxable sales.

Exception for temporarily increased turnover: If you believe your turnover will only temporarily exceed £90,000, you can apply for a registration exception. Write to HMRC with evidence showing your future turnover will stay below the £88,000 deregistration threshold.

How to register for VAT

You can register online through the HMRC website. HMRC says you'll usually receive a VAT registration certificate within 30 working days, although it can take longer.

You'll need the following information to complete your registration:

• National Insurance number or unique taxpayer reference (UTR)
• Business bank account details
• Trading name, address, and start date of your business
• Details of any businesses you've owned in the past two years

Follow these steps to complete your VAT registration:

1. Go to the HMRC register for VAT page
2. Sign in or create a Government Gateway account
3. Complete the online form with your business details
4. Submit your application

Most businesses must register online. Paper forms are available only in limited cases, such as certain exemption situations or where HMRC cannot register you online.

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

Managing your VAT with Xero

Accounting software like Xero simplifies VAT compliance by automating calculations and filing returns directly to HMRC.

Xero provides these features to simplify your VAT management:

• Automatic VAT tracking: Records VAT on every transaction so you always know your position
• Multiple scheme support: Handles Flat Rate, Cash Accounting, and standard VAT schemes
• Direct HMRC submission: Files your VAT returns without leaving Xero
• Real-time visibility: Shows exactly how much VAT you owe or can reclaim

Regular monitoring helps you stay prepared at return time and keeps your business on track.

FAQs on VAT registration thresholds

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

Is the first £90,000 VAT free?

No. The £90,000 threshold determines when you must register, not whether VAT applies to your sales.

Once registered, you charge VAT on all taxable sales from your effective registration date. You don't charge VAT retrospectively on sales made before registration.

If you voluntarily register before reaching £90,000, you charge VAT from day one of registration, regardless of your turnover.

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

No, registration is optional if your turnover is under £90,000. However, voluntary registration may benefit your business.

Voluntary registration may benefit you in these situations:

• Most clients are VAT-registered: They can reclaim the VAT you charge, making your prices more competitive
• You're approaching the threshold: Register now to reclaim VAT on startup costs like equipment and professional fees
• You have significant business expenses: Reclaiming VAT on purchases can improve your cash flow

What is the UK VAT registration threshold for 2025?

The UK VAT registration threshold is £90,000 for the 2025/26 tax year. This threshold remains unchanged for 2026/27. If your VAT-taxable turnover stays below £90,000, you don't need to register.

Who is exempt from VAT registration?

You don't need to register if all your sales are VAT-exempt (such as insurance, finance, or education services).

Zero-rated supplies (like books and children's clothing) are different. They're still taxable at 0%, so they count toward your £90,000 threshold.

If you're VAT-registered and make some exempt supplies, your business is partly exempt. This affects how much VAT you can reclaim. See the HMRC guidance on VAT exemption for details.

What penalties apply if I register late?

HMRC charges penalties for late VAT registration based on how late you register and how much VAT you owe.

Penalties are calculated as follows based on how late you register:

• Up to nine months late: 5% of VAT owed
• Nine to 18 months late: 10% of VAT owed
• More than 18 months late: 15% of VAT owed

You'll also owe the VAT you should have charged from your correct registration date, plus interest.

To avoid penalties: Check your rolling 12-month turnover at the end of every month and register within 30 days of exceeding £90,000.

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