VAT Registration Threshold: When You Must Register

You must register for VAT when your VAT taxable turnover for the last 12 months goes over the VAT registration threshold of £90,000, or when you expect it to go over that amount in the next 30 days alone. The test is a rolling one, checked at the end of every month, not once a year.

Growing businesses cross the VAT registration threshold without noticing more often than you might think, usually because they look at turnover once a year when the accounts are done. By then the registration date may be months in the past. This guide explains how the two tests work, what counts as taxable turnover, and what to do as you approach the line.

Key takeaways

• The threshold is £90,000 of VAT taxable turnover; check the current figure on GOV.UK.
• It is a rolling 12-month test, checked at the end of each month.
• A second test applies if you expect to exceed the threshold in the next 30 days alone.
• You must register within 30 days of the end of the month you went over.
• Registering late means paying the VAT you should have charged, plus a possible penalty.

What "VAT taxable turnover" means

VAT taxable turnover is the total value of everything you sell that is not exempt from VAT or outside its scope. It includes sales at the standard rate, the reduced rate and the zero rate. It does not include exempt supplies, such as most insurance and some education and health services. HMRC sets out the rules on GOV.UK's page on registering for VAT.

Two points catch people out. First, it is turnover, not profit: your costs are irrelevant to the test. Second, VAT registration belongs to the person, not the individual business. A sole trader who runs two separate trades must add the taxable turnover of both together. A limited company is a separate person from its director, but HMRC can challenge arrangements that artificially split one business into several to stay under the threshold.

The two tests compared

The thresholds and timings are published on GOV.UK's VAT thresholds page.

Why the rolling test catches businesses out

The rolling test ignores tax years and accounting years. At the end of October you add up November to October. At the end of November you drop the oldest month and add the newest. A seasonal business can pass the threshold after a strong few months even though its last set of accounts showed turnover comfortably below it.

Once you pass the threshold, the dates are fixed by law. If you went over at the end of October, you must register by 30 November and your registration starts on 1 December. From that date you have to account for VAT on your taxable sales, whether or not you have actually registered. That is the cost of noticing late: you owe HMRC VAT on sales you have already made, often without having charged it to your customers.

If you go over temporarily

If your turnover has gone over the threshold because of a one-off event and you can show it will not stay there, you can ask HMRC for an exception from registration. You need to apply and explain why your taxable turnover will fall back below the deregistration threshold, which is slightly lower than the registration threshold. HMRC considers the request and confirms in writing; do not simply assume it applies. Check the current deregistration figure on GOV.UK.

What changes once you are registered

• You charge VAT on taxable sales and issue proper VAT invoices.
• You can reclaim VAT on business purchases, subject to the usual rules.
• You keep digital records and file returns through Making Tax Digital compatible software.
• Returns are usually quarterly, with the return and payment normally due 1 month and 7 days after the period ends.
• You may be able to reclaim VAT on some goods and services bought before registration, within time limits.
• You choose an accounting scheme: standard, cash accounting or the Flat Rate Scheme.

Our guides to the Flat Rate Scheme, the Cash Accounting Scheme and VAT invoice requirements cover those choices.

Step by step: monitoring the threshold

1. Keep bookkeeping up to date monthly, so sales figures are reliable.
2. At each month end, total the last 12 months of taxable sales. Most accounting software can report this.
3. Exclude exempt and out-of-scope income, but include zero-rated sales.
4. Combine all your sole trader businesses if you have more than one.
5. Set an early warning level, for example when the rolling total reaches about £75,000, and start planning.
6. Decide on pricing. Work out whether you will add VAT on top of your prices or absorb some of it.
7. Register online in time and choose your accounting scheme.
8. Update invoices, software and customer communications from the effective date.

Worked example (illustrative example)

"Meadow & Stem", an invented illustrative example, is a florist run by a sole trader. Her accounts to 31 March 2026 showed turnover of £78,000, so she assumed VAT was not a concern. A busy summer of weddings changed that. Her rolling 12-month taxable turnover was:

• 12 months to 31 August 2026: £86,400
• 12 months to 30 September 2026: £88,900
• 12 months to 31 October 2026: £91,200

She went over the threshold at the end of October 2026. She must register by 30 November 2026 and will be VAT-registered from 1 December 2026. Because she checks the figure monthly, she has time to reprice her wedding packages, tell her trade customers and set up her software before the first VAT-inclusive sale. Had she waited for her next accounts, she would have owed VAT on months of sales priced without it. The business and figures are invented to illustrate the timing.

Common mistakes

• Checking turnover once a year instead of on a rolling monthly basis.
• Using profit rather than turnover.
• Leaving out zero-rated sales, which do count as taxable turnover.
• Looking at each trade separately when one person runs them both.
• Splitting a business artificially to stay under the threshold.
• Assuming a temporary spike is automatically ignored without applying to HMRC for an exception.
• Not repricing before the registration date, which squeezes margins overnight.

Approaching the threshold?

Our VAT returns service starts from £120 per quarter and includes registration, advice on the right scheme and filing through MTD-compatible software. Reliable monthly figures are what make threshold monitoring possible, which is where our bookkeeping service, from £150 per month, comes in.

Think you may already be over? Talk to us as soon as you can, or see our pricing.