What is the VAT Threshold?

The VAT threshold is the turnover level at which a business must register for VAT, currently £90,000. Once your taxable turnover crosses that figure within any rolling 12-month period, registration stops being optional.

Key Takeaways

• The VAT threshold is currently £90,000, measured over a rolling 12-month period rather than a fixed tax year.
• You must register within 30 days of crossing it, or of realistically expecting to cross it within the next 30 days.
• Once registered, you'll charge VAT on sales, pay VAT on purchases, and file regular VAT returns.
• You can register voluntarily below the threshold, which lets you reclaim VAT on business expenses.
• You can deregister once your turnover drops below £88,000, provided you can show it's likely to stay there.

What Is the VAT Threshold?

A VAT threshold is the turnover limit your business can reach before registering for VAT becomes a legal requirement rather than a choice.

For the 2026/27 tax year, that threshold is £90,000. Cross it, and you must register. Stay below it, and you can still register voluntarily if it suits your business, though there's no obligation to.

Once registered, a few extra responsibilities follow:

• Charging VAT on the goods and services you sell
• Paying VAT on what you buy for the business
• Submitting regular VAT returns to HMRC
• Keeping proper VAT records and a VAT account

Why Does Crossing the Threshold Actually Matter?

Because it changes your pricing, your cash flow, and your admin all at once. Charging VAT means your customers effectively pay 20% more, so you'll need to decide whether to absorb that into your margin or pass it on. It's also worth adjusting your cash flow planning, since VAT sometimes needs paying to HMRC before you've actually collected it from a customer.

On the upside, registration lets you reclaim VAT on your own business purchases, which can offset some of the extra admin. Some businesses register voluntarily for exactly this reason, and because trading as VAT-registered can make you a more straightforward partner for other VAT-registered businesses to work with.

Crossing the threshold is often a sign your business is genuinely growing, so treat it as a step to plan for rather than a problem to avoid.

How Do I Actually Register?

Check your turnover first. If your taxable turnover over the last 12 months is under £90,000, registration isn't required, though you can still choose to register. If you expect to cross £90,000 within the next 30 days, you need to register immediately, known as the future turnover test.

Gather your business bank details, turnover figures, Unique Taxpayer Reference, and Self Assessment details, then choose the VAT scheme that suits your business, Flat Rate, Cash Accounting, or Annual Accounting are the main options, and it's worth getting advice on which fits before committing.

Register through the online HMRC portal, and your VAT registration certificate, with your VAT number, typically follows within 30 days. Our VAT registration assistance can help make sure your application goes in correctly the first time, since mistakes here are a common cause of delay.

When Can I Deregister for VAT?

Once your taxable turnover drops below £88,000, provided you can reasonably show it'll stay there for the next 12 months. You can also deregister if your business structure changes, closing down or merging with another company, for example.

To deregister, notify HMRC through your Government Gateway account or by post using form VAT7, including your reason and intended deregistration date. You'll then submit a final VAT return covering everything up to that date, and keep your VAT records, including HMRC correspondence, for six years afterward in case of a future review.

FAQs

What is the current VAT registration threshold?

£90,000, measured over any rolling 12-month period rather than a fixed calendar or tax year.

Can I register for VAT if my turnover is below £90,000?

Yes, voluntary registration is available below the threshold, and many businesses do this specifically to reclaim VAT on expenses.

What happens if I expect to exceed the threshold within the next month?

You need to register immediately under the future turnover test, rather than waiting until the sales actually land.

When can I deregister for VAT?

Once your turnover falls below £88,000 and you can show it's likely to stay there over the next 12 months.

What are my main responsibilities once VAT registered?

Charging VAT correctly, paying what's due to HMRC, filing regular returns, and keeping digital records compliant with Making Tax Digital.

This article is for general information only and does not constitute tax advice. VAT thresholds and rules can change, so it's worth checking current guidance on GOV.UK or speaking to a qualified accountant.