What is the VAT threshold?
The VAT threshold is the level of taxable turnover, currently £90,000 over any rolling 12 months, above which a UK business must register for VAT.
What the VAT threshold means
A business must register for VAT if its VAT-taxable turnover goes over £90,000 in any rolling 12-month period, or if it expects to go over £90,000 in the next 30 days alone. The threshold has applied since 1 April 2024. The deregistration threshold is £88,000: you can cancel your registration if you expect taxable turnover in the next 12 months to be below that.
Taxable turnover includes standard-rated, reduced-rate and zero-rated sales. It excludes VAT-exempt sales (such as most insurance, finance and some education and health services) and sales outside the scope of UK VAT.
Example
A photographer's taxable sales over the last 12 months, checked at the end of each month:
| 12 months to | Rolling turnover |
|---|---|
| 31 July | £84,600 |
| 31 August | £88,900 |
| 30 September | £91,300 |
The threshold is passed at the end of September. The photographer must tell HMRC within 30 days, by 30 October, and becomes VAT registered from 1 November. From then on, a £1,000 shoot becomes £1,200 to a client who cannot reclaim VAT.
Why it matters for your business
The test is rolling, not by tax year or accounting year, so it has to be checked every month. Registering late means paying HMRC the VAT you should have charged, out of your own pocket if you cannot recover it from customers, plus a possible penalty.
Crossing the threshold can mean an effective 20% price rise for customers who are consumers or not VAT registered. Some businesses manage turnover to stay under it; others register voluntarily because their customers are VAT registered and they can reclaim VAT on their own costs. The Flat Rate Scheme can simplify returns for smaller businesses.
Once registered, you must keep digital records and file returns through Making Tax Digital compatible software, usually quarterly.
Businesses based outside the UK
Non-established businesses supplying goods or services in the UK have no threshold: they must register from their first taxable supply.
Keeping an eye on it
Set a monthly reminder to total your taxable sales for the last 12 months, or run a rolling report in Xero or QuickBooks. Watch out for one-off large sales, which can tip you over the 30-day forward test on their own, and remember that zero-rated sales count towards the threshold even though no VAT is charged on them.
Common questions
Turnover. It is the value of your VAT-taxable sales over the last 12 months, before any costs. A business with £95,000 of taxable sales and £5,000 of profit still has to register. Exempt sales are left out of the calculation.
Yes. Voluntary registration lets you reclaim VAT on purchases and can make a small business look more established. It suits businesses whose customers are VAT registered. It is less attractive if you sell mainly to the public.