Guide

The VAT registration threshold: when you must register

A UK business has to register for VAT once its taxable turnover goes over £90,000. There are two separate tests, one looking back over the last 12 months and one looking forward over the next 30 days, and each has its own deadline and start date. This guide covers both tests, what counts towards the £90,000, what to do if you go over only briefly, what registering late costs, when registering voluntarily makes sense, and how to deregister once turnover falls below £88,000.

Last checked 9 November 2026 against GOV.UK's Register for VAT guide, VAT Notices 700/1 and 700/11 and HMRC's factsheet on failure to notify penalties. This is general information, not tax advice.

The thresholds: £90,000 and £88,000

The figures are HMRC's, from the supplement to VAT Notice 700/1. Budget 2026, on 28 October 2026, did not change either of them. The threshold applies to businesses based in the UK. A business based outside the UK that supplies goods or services in the UK has no threshold and must register whatever its turnover.

What counts towards the £90,000

The test uses your taxable turnover: the total value of everything you sell that is not exempt from VAT or outside its scope. It is your sales, not your profit. It includes:

• standard‑rated, reduced‑rated and zero‑rated sales, so a business that sells only zero‑rated goods, such as most food, books or young children's clothes, still counts them;
• goods you hire or lend to customers;
• business goods you use for yourself;
• goods you barter, part-exchange or give away as gifts;
• services you buy from businesses abroad that you have to reverse charge, and supplies under the domestic reverse charge;
• building work over £100,000 that your business did for itself.

It leaves out exempt sales, such as insurance, providing credit and certain education and training, and sales of your capital assets, such as a van or equipment you no longer need. If you sell only exempt or out-of-scope goods and services, you do not have to register at all.

The rolling 12-month test

At the end of every month, add up your taxable turnover for the last 12 months. This is a rolling total, not your tax year or your accounting year. If it is over £90,000, you must register within 30 days of the end of that month, and you are registered from the first day of the second month after you went over.

HMRC's example in Notice 700/1: if your turnover for the previous 12 months went over the threshold on 31 August, you must apply by 30 September and your registration date is 1 October. Going over part-way through a month gives the same dates as going over on its last day. GOV.UK's example: a business whose total for the last 12 months first passes £90,000 on 15 July must register by 30 August and is registered from 1 September.

A business that grows steadily usually crosses the line this way, so the habit worth having is a monthly check of the last 12 months' sales. Add the newest month and drop the oldest each time.

The 30-day test

Separately, if at any time you expect your taxable turnover in the next 30 days alone to go over £90,000, you must register by the end of those 30 days. This time you are registered from the date you realised, not the date the turnover arrives.

GOV.UK's example: on 1 May you agree a £100,000 contract to provide services, to be paid at the end of May. You must apply by 30 May and you are registered from 1 May. This catches a single large contract or order, even in a business that has never been near the threshold before.

You cannot show VAT on an invoice until HMRC gives you a VAT number, but you owe VAT from your registration date. HMRC's advice is to agree the VAT with your customer in advance: in the example, tell the customer you will add 20% and invoice £120,000. Once the number arrives, issue a VAT invoice for the same total showing £20,000 of VAT. Notice 700/1 asks for that invoice within 30 days of getting the number. The customer pays nothing extra and, if VAT registered, reclaims the £20,000 on its next return. The UK invoice generator makes a VAT invoice with your VAT number and the rate and VAT amount on each line.

If you go over only briefly

If your 12-month total has gone over £90,000 but you can show HMRC that your taxable turnover in the next 12 months will not go over £88,000, you can apply for an exception from registration. A one-off job that will not be repeated is an example. You apply on paper: phone HMRC and say you want to apply for an exception, and it sends you forms VAT1 and VAT5EXC to fill in and return. HMRC replies within 40 working days. If it refuses, it registers you from the date you were first liable, and you owe VAT from then, so apply as early as you can. An exception is not permanent: you keep checking every month and apply again, or register, if you go over again.

A different route, exemption from registration, is for businesses whose sales are all or mostly zero‑rated. If you also make some sales at the standard rate, you have to show that the VAT you would reclaim on costs would normally be more than the VAT you would charge. With an exemption you do not charge VAT, but you cannot reclaim any either.

How to register and what happens next

Most businesses register online through HMRC's Register for VAT service, which you can save and return to. A sole trader or partnership needs a National Insurance number, an identity document such as a passport or driving licence, bank details, the Unique Taxpayer Reference if you have one, details of your turnover and an estimate of taxable turnover for the next 12 months. A company needs its company registration number and Unique Taxpayer Reference instead of the personal details.

HMRC then sends, by post, your 9-digit VAT number, your registration date and when your first VAT return and payment are due. It signs the business up to Making Tax Digital for VAT, unless it is exempt, so returns go through compatible software. If you have heard nothing after 40 working days, HMRC asks you to contact its VAT Registration Service then, and not before.

On your first return you can usually reclaim VAT you paid before registering: on goods for the business bought up to 4 years before your registration date that you still have, and on services from up to 6 months before. If your margins suit it, you can also apply for the Flat Rate Scheme when you register; the Flat Rate Scheme guide explains it and the VAT flat rate calculator compares it with normal VAT accounting for your figures.

Registering late

HMRC registers you from the date you should have been registered, whenever you tell it. You then owe VAT on your sales from that date even though you did not charge your customers VAT. You can set against it the VAT on your costs over the same period, if you hold VAT invoices for them.

On top of that, HMRC can charge a failure to notify penalty under Schedule 41 of the Finance Act 2008. It is a percentage of the potential lost revenue, the tax that would have been lost because you did not register. The range depends on why you were late and whether you told HMRC before it found out. For a failure that was not deliberate, it also depends on whether you put it right within 12 months of the tax being due:

Where in the range you land depends on how fully you help HMRC put it right. There is no penalty if you had a reasonable excuse, the failure was not deliberate, and you registered without unreasonable delay once the excuse ended. HMRC's own worked example: a penalty rate of 23% on £3,000 of potential lost revenue is a £690 penalty. The cheapest course, if you find you have missed the date, is to register straight away and tell HMRC before it asks.

Registering voluntarily

You can register below £90,000, and before you start selling, as long as you are in business; HMRC may ask you to show that you plan to make taxable sales. You choose your registration date, and you can ask for it to be backdated by up to 4 years. Choose carefully: once you are registered the date cannot be changed, and a request to change it carries no right of appeal or review. From that date you charge VAT on your sales, reclaim it on your costs, and file a return for every period, even when there is nothing to pay.

Whether it pays depends mostly on who your customers are:

• if they are mostly VAT‑registered businesses, they can usually reclaim the VAT you add, so your price to them in effect stays the same and you gain the VAT back on your own costs;
• if they are mostly consumers or businesses that are not registered, the 20% is a real price rise, or a cut in your margin if you hold prices;
• if your sales are mostly zero‑rated, you charge no VAT but can reclaim it on costs, so HMRC usually repays you each period.

Registration also brings the work of keeping VAT records and filing returns through Making Tax Digital software, which is the main cost for a business that would otherwise gain little.

Deregistering below £88,000

You can ask HMRC to cancel your registration if you can satisfy it that your taxable turnover, excluding VAT, in the next 12 months will not go over £88,000. You explain why turnover is falling, for example shorter opening hours or a lost contract, and what you expect it to be. HMRC will not agree if the fall is because you plan to stop trading or stop making taxable sales for 30 days or more in the next 12 months, and it needs to be satisfied that you will stop charging VAT; a retailer needs to show it will cut prices by the VAT.

You can cancel online. The cancellation date is the day HMRC receives your application or a later date you agree with it; it cannot be backdated. Keep charging VAT until HMRC confirms the cancellation, usually within 40 working days. You then file a final return up to the cancellation date and account for VAT on stock and assets you still hold and reclaimed VAT on, unless the VAT due on them would be £1,000 or less. Keep your VAT records for 6 years.

Deregistering is a choice when turnover falls. It is compulsory, within 30 days, if you stop being eligible, for example because you stop trading or making taxable sales.

Selling through online marketplaces from October 2027

Budget 2026 announced that from October 2027 online marketplaces will collect the VAT on sales by UK businesses, where those businesses sell more than £90,000 a year through that marketplace, as well as on sales by UK businesses that are VAT registered. Personal sales, sales of second‑hand goods and sales to other businesses are left out. It is a plan, not yet in force, and it changes who collects the VAT, not the registration threshold.

Sources

• Register for VAT, GOV.UK: when to register (both tests, the examples, taxable turnover, exception and exemption), how to register, cancelling your registration.
• Who should register for VAT (VAT Notice 700/1), GOV.UK (updated 5 August 2026): paragraphs 3.3, 3.4, 3.7, 3.9, 3.11, 4.2 to 4.6, 5.1, 5.2 and 14.2, and the supplement with current and past thresholds.
• Apply for an exception from registering for VAT, GOV.UK.
• Cancelling your VAT registration (VAT Notice 700/11), GOV.UK (updated 31 March 2026): paragraphs 3.1 to 3.4 and 7.1.
• Penalties for failure to notify (CC/FS11), HMRC factsheet on GOV.UK (updated 19 March 2026).
• Budget 2026, HM Treasury on GOV.UK (28 October 2026): online marketplace liability.