VAT Registration Threshold 2026: When Must Your Business Register?

The UK VAT registration threshold is £90,000 of VAT-taxable turnover. A business must normally register when its taxable turnover for the previous 12 months goes over that amount, or when it expects to exceed £90,000 in the next 30 days alone.

The calculation is not based on profit, the tax year or your annual accounts. This guide explains the VAT registration threshold, deadlines, taxable turnover and practical steps for businesses approaching the limit.

What is the VAT registration threshold in 2026?

The compulsory VAT registration threshold is £90,000. The separate deregistration threshold is £88,000.

The thresholds relate to VAT-taxable turnover. They are not an allowance deducted from sales and do not mean that only turnover above £90,000 is subject to VAT after registration.

What counts as VAT-taxable turnover?

VAT-taxable turnover is the total value of supplies that are not exempt from VAT. It generally includes standard-rated, reduced-rated and zero-rated sales.

Zero-rated sales count towards the threshold even though the VAT rate charged is 0%. This point is important for businesses selling products such as certain foods, children’s clothing or printed materials.

Genuinely exempt supplies normally do not count. Examples can include certain financial, insurance, education, health and property supplies, but VAT exemption rules are detailed. A business with mixed income should classify each supply correctly.

Turnover is measured before business expenses. A £100,000 turnover with £70,000 of costs is still £100,000 turnover for the threshold test.

The rolling 12-month test

At the end of every month, add the taxable turnover from the previous 12 months. If the total first goes over £90,000, the business has exceeded the historic threshold.

This is a continuously moving window. It is not enough to check the total once at the company year end or after completing Self Assessment.

Example of the rolling test

A business reviews its figures on 31 July. Taxable sales from 1 August of the previous year to 31 July total £92,000. This is the first month-end total above £90,000.

The business must normally notify HMRC within 30 days of the end of July, meaning by 30 August. Its effective date of registration is 1 September, the first day of the second month after exceeding the threshold.

The next-30-days test

A separate rule applies if, at any time, you expect taxable turnover in the next 30 days alone to exceed £90,000. This might happen after signing one large contract or confirming a major order.

You must register by the end of that 30-day period. The effective date is the date you first knew the threshold would be exceeded, not the later date when the customer pays or the sales are completed.

Unlike the rolling test, the forward test is not a forecast for the next 12 months. It asks whether the next 30 days alone will exceed £90,000.

When must you register?

• Historic test: notify HMRC within 30 days of the end of the month in which rolling taxable turnover first exceeded £90,000.
• Future test: notify HMRC by the end of the 30-day period when you expect that period’s taxable turnover to exceed £90,000.
• Non-established businesses: separate rules can require registration without the normal threshold where a business is based outside the UK and makes taxable UK supplies.

What is the effective date of VAT registration?

Under the historic test, the normal effective date is the first day of the second month after the month in which the threshold was exceeded.

Under the future test, it is the date the expectation arose. This can be earlier than the date the business applies, so delays may create VAT that must be accounted for retrospectively.

Can you apply for an exception?

If turnover went over £90,000 temporarily, HMRC may grant an exception from registration. You must show that taxable turnover in the next 12 months is not expected to exceed the £88,000 deregistration threshold.

An exception is not automatic. The business must apply and supply evidence. It should continue monitoring turnover because a later breach can create a fresh registration requirement.

The exception is generally relevant to the historic test; it is not available where the next-30-days test has been met.

Can you register voluntarily?

Yes. A business can apply for voluntary VAT registration while below £90,000. This may help where customers are VAT-registered and the business has significant VAT-bearing costs.

However, voluntary registration creates ongoing duties. The business must charge the correct VAT, issue valid invoices, keep digital records, submit returns and pay VAT on time.

For a consumer-facing business, adding VAT can affect pricing or margin because many customers cannot recover it. Model the commercial effect before registering voluntarily.

What happens after VAT registration?

From the effective date, the business must account for VAT on taxable supplies. It should update invoices, pricing, contracts, bookkeeping software and customer communications.

Most businesses submit returns through Making Tax Digital-compatible software. A VAT return normally reports output tax on sales, input tax on eligible purchases and the balance due to or from HMRC.

The business may be able to reclaim VAT on certain purchases made before registration, subject to time limits and evidence. Broadly, the look-back can be up to four years for qualifying goods still held and six months for qualifying services. Detailed conditions apply.

What if you register late?

HMRC can register the business from the date it should have been registered. VAT may then be due on relevant sales made from that date, even if customers were not charged extra.

The business may also face interest and penalties. Late registration can therefore turn VAT into a cost that must be paid from existing margins.

Contact HMRC promptly and correct the position rather than waiting for an enquiry. Accurate turnover records will help establish the correct date.

Do several businesses share one threshold?

A sole trader’s activities normally form one taxable person, so turnover from different trades operated by the same individual may need combining. A partnership or limited company is a separate legal person for VAT purposes.

Artificially splitting one business to keep each part below £90,000 can be challenged by HMRC. It may direct that the activities are treated together where separation is artificial.

Separate companies are not automatically combined merely because they have the same owner, but group structures, management, customers, premises and commercial arrangements should be reviewed carefully.

Does VAT registration depend on cash received?

Not always. The threshold looks at the value of taxable supplies, and the VAT tax point rules determine when supplies are made. Depending only on bank receipts can give the wrong answer, especially where invoices are issued before or after payment.

A business using cash accounting after registration may pay VAT to HMRC when customers pay, but that scheme does not replace the registration tests.

Should you stop trading near £90,000?

Turning work away solely to avoid registration can restrict growth. Instead, compare pricing, customer type, costs, competitors and expected future turnover.

A business selling mainly to VAT-registered customers may be able to add VAT with limited commercial impact. A consumer-facing business may need to change VAT-inclusive prices, accept a reduced margin or redesign its offering.

Common VAT threshold mistakes

• Checking turnover only at the financial year end.
• Using profit instead of taxable turnover.
• Excluding zero-rated sales.
• Including exempt income without checking its treatment.
• Ignoring turnover from another sole-trader activity.
• Missing the next-30-days test after winning a large contract.
• Waiting for payment before counting a supply.
• Assuming a temporary breach creates an automatic exception.
• Applying late and failing to reserve VAT.
• Artificially splitting activities between connected businesses.

A monthly VAT threshold checklist

1. Export taxable sales for the latest 12-month period.
2. Separate standard-rated, reduced-rated, zero-rated and exempt income.
3. Confirm that all business activities are included.
4. Review signed contracts and expected sales for the next 30 days.
5. Record the month-end calculation and supporting reports.
6. Forecast when turnover may pass £90,000.
7. Plan pricing and customer communications before registration.
8. Seek advice immediately if the threshold has already been exceeded.

Get ready before reaching the threshold

Good VAT planning starts before compulsory registration. Real Key Accountancy can review taxable turnover, identify the correct registration date, prepare the application and set up compliant VAT records.

Contact us if your turnover is approaching £90,000 or you are unsure whether a supply counts towards the threshold.

Frequently asked questions

Is the VAT threshold £90,000 profit?

No. It is based on VAT-taxable turnover before expenses, not profit.

Does zero-rated turnover count?

Yes. Zero-rated supplies are taxable supplies and normally count towards the registration threshold.

Is the threshold measured by tax year?

No. The main historic test uses taxable turnover for the previous rolling 12 months at each month end.

Can I deregister as soon as sales fall below £90,000?

Not necessarily. The deregistration threshold is £88,000 and HMRC considers expected taxable turnover for the relevant future period. Other conditions also apply.

Can a limited company and sole trade each have a threshold?

They are generally separate taxable persons, but arrangements must be genuine. HMRC can act where activities have been artificially separated.

This article provides general UK VAT information and is not personalised tax advice. VAT treatment depends on the facts and rules can change.