You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period, or when you expect it to exceed £90,000 in the next 30 days alone. The £90,000 threshold has applied since 1 April 2024 and is unchanged for 2026/27. You have 30 days to notify HMRC once either test is met.
That is the rule in two sentences. The reason accountants still get asked about it every week is that almost nobody trips over the number itself they trip over how it’s measured. Below are the two tests, three worked examples with real dates and figures, and what it actually costs if you leave it too late.
VAT thresholds at a glance (2026/27)
| Amount | What it means | |
|---|---|---|
| Registration threshold | £90,000 | Cross it and you must register |
| Deregistration threshold | £88,000 | Fall below it and you may cancel |
| Time to notify HMRC | 30 days | From the end of the month you crossed |
| Non-UK sellers storing goods in the UK | £0 | Register from the first sale |
| In force since | 1 April 2024 | No change announced for 2026/27 |
What actually counts towards the £90,000?
Taxable turnover means the total value of everything you sell that isn’t VAT-exempt. It is not your profit, and it is not your bank balance.
Counts towards the threshold:
- Standard-rated sales (20%)
- Reduced-rated sales (5%)
- Zero-rated sales (0%) — children’s clothing, most food, books. Still taxable, still counted
- Goods you hired or loaned to customers
- Business goods used for personal reasons
- Building work over £100,000 your business did for itself
Does not count:
- VAT-exempt supplies — insurance, most finance, postage stamps, and much of health and welfare
- Out-of-scope supplies
- Sales of capital assets, such as a van or equipment you’re disposing of
Two traps worth flagging. First, zero-rated is not the same as exempt. A Birmingham food wholesaler selling £120,000 of zero-rated groceries is over the threshold and must register — even though the VAT charged will be nil. Registering is often to their advantage, because they can reclaim VAT on costs while charging none.
Second, HMRC aggregates you, not your businesses. If you’re a sole trader running a barbershop and doing weekend van deliveries, both turnovers are added together. There is no separate £90,000 allowance per venture. Deliberately splitting one business into two to stay under the line — “disaggregation” — is something HMRC can and does challenge with a direction to treat the businesses as one.
Test 1: the rolling 12-month look-back
At the end of every month, add up your taxable turnover for the previous 12 months. Not your accounting year. Not the tax year. The previous 12 months, recalculated every single month.
If that running total goes over £90,000:
- Notify HMRC within 30 days of the end of the month you crossed in
- Your registration takes effect from the first day of the second month after you crossed
- You charge VAT on everything from that effective date onwards
This is the test that catches growing businesses, because the total moves quietly in the background while you’re busy trading.
Test 2: the 30-day forward look
This one is separate, and far more often missed. If at any moment you have reasonable grounds to believe your taxable turnover will exceed £90,000 in the next 30 days on its own, you must register — regardless of what your last 12 months looked like.
The trigger is the moment you form that expectation, not the moment the money lands. Sign a large contract on a Tuesday and you may be liable from that Tuesday, even if your trailing turnover is £40,000 and the invoice isn’t paid until November.
You must register by the end of that 30-day period, and your effective date is the date you had reasonable grounds — which means VAT applies to that contract.
Three worked examples
Example 1 — The e-commerce seller who drifted over
Priya runs a homeware store on Shopify from Small Heath, Birmingham. Her sales have grown steadily rather than dramatically:
| Rolling 12 months ending | Taxable turnover |
|---|---|
| 31 May 2026 | £86,200 |
| 30 June 2026 | £88,900 |
| 31 July 2026 | £91,400 ← crossed |
What Priya must do:
- Notify HMRC by 30 August 2026 — 30 days from the end of July
- Effective date of registration: 1 September 2026 — the first day of the second month after crossing
- Charge VAT from 1 September on all standard-rated sales
Priya’s real problem isn’t the paperwork, it’s the pricing. Her customers are consumers who can’t reclaim VAT. A £30 lamp either becomes £36, or her margin absorbs £5 per unit. She had six weeks to decide, and she only had them because she was checking her rolling total monthly. Most people find out in March when their accounts are prepared — nine months and roughly £15,000 of unrecoverable VAT too late.
The practical takeaway: once your rolling 12-month total passes about £75,000, check it at the end of every single month. That one habit is the difference between a planned transition and a backdated bill.
Example 2 — The contractor caught by the forward look
Marcus runs a shopfitting business in Digbeth. His trailing 12-month turnover to 31 August 2026 is £62,000 — comfortably under.
On 8 September 2026 he signs a contract to fit out a city-centre restaurant. The work is £96,000 and will all be invoiced within four weeks.
What Marcus must do:
- Register by 7 October 2026 — the end of the 30-day period
- Effective date: 8 September 2026 — the day he had reasonable grounds
- VAT is due on that contract, because the effective date falls before the work was invoiced
Here’s what it costs if he gets it wrong. Marcus quoted £96,000 with no mention of VAT. If the contract is deemed VAT-inclusive, HMRC takes one sixth of it — £16,000 — out of a job he priced as though he’d keep the lot. His client is VAT-registered and could have reclaimed it painlessly, had the quote said “£96,000 plus VAT.”
The practical takeaway: if a single contract or an unusually large order would push you past £90,000 in a month, get advice before you sign, and price it “plus VAT where applicable.” Adding VAT to a quote costs nothing. Retrofitting it costs you the margin.
Example 3 — The one-off spike, and the exception nobody applies for
Sofia runs a small events company in Solihull. Her rolling 12 months to 31 October 2026 hits £93,500 but £22,000 of that came from a single conference contract that will not repeat. Strip it out and her genuine run rate is around £71,500.
Crossing the threshold does not automatically mean she has to register. HMRC operates an exception from registration where a breach is genuinely temporary.
What Sofia must do:
- Still notify HMRC within 30 days — by 30 November 2026. The exception is something you apply for, not something you assume
- Provide evidence that her taxable turnover for the next 12 months will stay below the £88,000 deregistration threshold — forward bookings, the non-recurring nature of the contract, prior-year figures
- Wait for HMRC’s decision. If granted, she doesn’t register. If refused, she registers from the standard effective date
The practical takeaway: silence is not an application. Businesses that cross the line, assume “it was a one-off,” and say nothing to HMRC end up in the failure-to-notify regime — even when their exception case was strong. The email costs nothing to send.
What happens if you register late?
Late registration falls under the failure to notify rules in Schedule 41, Finance Act 2008. The penalty is a percentage of the potential lost revenue — the VAT you should have charged and paid over during the period you weren’t registered.
Two things drive the percentage: whether the failure was deliberate, and whether you came forward before HMRC came looking.
| Behaviour | Unprompted disclosure | Prompted disclosure |
|---|---|---|
| Non-deliberate, within 12 months | 0% – 30% | 10% – 30% |
| Non-deliberate, over 12 months | 10% – 30% | 20% – 30% |
| Deliberate | 20% – 70% | 35% – 70% |
| Deliberate and concealed | 30% – 100% | 50% – 100% |
The floor of 0% in the top-left cell is the whole story. Register a little late, tell HMRC yourself before they notice, cooperate fully — and the penalty can genuinely be nil.
But the penalty is rarely the painful part. You still owe the VAT itself, calculated from the date you should have registered. On £120,000 of standard-rated sales made while unregistered, that’s roughly £20,000 you were supposed to collect from customers and didn’t. Some of those customers will pay a retrospective VAT invoice. Many will have gone. That gap comes out of your own money, and it’s the reason late registration sinks otherwise healthy small businesses.
You can offset input VAT on purchases made during the unregistered period, which softens the blow provided you kept the receipts. If your record-keeping was loose, you’ll be paying output VAT with very little to set against it.
Should you register voluntarily, before you have to?
You can register at any turnover level. For a meaningful number of businesses, it’s the better commercial decision.
Voluntary registration usually makes sense when:
- Your customers are VAT-registered businesses. They reclaim the VAT you charge, so your prices are effectively unchanged, while you start reclaiming VAT on your own costs
- You’re buying heavily — stock, equipment, vehicles, professional fees. That input VAT becomes recoverable
- Your sales are zero-rated. You charge 0% but reclaim 20% on costs. This is a net refund position, and businesses in this category should almost always register early
- You’re about to cross anyway. Registering on your own timetable beats scrambling with a 30-day deadline
- You want the credibility. A VAT number signals scale, and some larger clients screen for one
Voluntary registration usually doesn’t make sense when:
- You sell to consumers. Your prices effectively rise 20% overnight, or your margin absorbs it
- Your costs are mostly VAT-free — wages, rent from an unregistered landlord, insurance. Little input VAT to recover
- You genuinely can’t face the admin. Quarterly returns and digital record-keeping are a real, recurring commitment
The honest test: sketch out one year both ways. Input VAT recoverable versus output VAT payable, plus the cost of compliance. If you sell B2B and buy a lot, the arithmetic usually favours registering. If you sell to the public, it usually doesn’t.
What changes the day you’re registered
- You charge VAT on all standard and reduced-rated sales from your effective date
- You keep digital records and file through MTD-compatible software. Making Tax Digital applies to all VAT-registered businesses — spreadsheets alone won’t satisfy it without bridging software
- You file VAT returns, usually quarterly, and pay within one month and seven days of the period end
- You reclaim input VAT on business purchases, which is the part people forget to be pleased about
- You may be able to reclaim pre-registration VAT — broadly, on goods still held from up to four years before registration, and on services from up to six months before
There’s also a scheme decision to make at the outset. Standard accounting, the Flat Rate Scheme, cash accounting and annual accounting all suit different businesses, and the VAT Margin Scheme is essentially compulsory reading for used car dealers. Choosing well at registration is far easier than switching later.
Frequently asked questions
What is the VAT registration threshold in the UK for 2026?
£90,000 of taxable turnover in any rolling 12-month period. It has been £90,000 since 1 April 2024 and is unchanged for the 2026/27 tax year. The deregistration threshold is £88,000.
Is the VAT threshold based on profit or turnover?
Turnover. Specifically, taxable turnover — the total value of your non-exempt sales before any costs are deducted. A business with £95,000 of sales and £90,000 of costs must still register.
Do zero-rated sales count towards the VAT threshold?
Yes. Zero-rated supplies are taxable at 0%, so they count in full. Only genuinely exempt supplies, such as most insurance and many health services, fall outside the calculation.
How long do I have to register after crossing the threshold?
Thirty days from the end of the month in which you crossed. Registration then normally takes effect from the first day of the second month after you went over.
Do I need to register for VAT if I have two small businesses?
If you trade as a sole trader, HMRC adds the taxable turnover of all your self-employed activities together. There is no separate allowance per business. Splitting a single business artificially to stay under the threshold can be challenged by HMRC.
Can I avoid registering if I only went over once?
Possibly — through an exception from registration, if you can show your taxable turnover for the following 12 months will stay under £88,000. You must still notify HMRC within 30 days and apply. Assuming the exception without applying is treated as a failure to notify.
What if I’m a non-UK seller storing stock in a UK warehouse?
The £90,000 threshold does not apply to you. Overseas sellers holding goods in the UK — including Amazon FBA sellers — must register from their first sale.
Can I register for VAT voluntarily below £90,000?
Yes, at any turnover. It’s usually worthwhile if you sell mainly to VAT-registered businesses, if your sales are zero-rated, or if you incur significant VAT on costs.
How much does VAT registration cost?
Registering yourself through your Government Gateway account on GOV.UK is free. An accountant’s fee covers getting the effective date right, choosing the correct scheme from the start, and setting up MTD-compliant records.
Not sure where your rolling total sits?
Most businesses that register late weren’t careless they simply never had a running figure in front of them. If your turnover is anywhere in the £70,000–£90,000 range, the answer is worth knowing this month rather than next March.
ATB Solutions is a Birmingham accountancy practice working with sole traders, landlords, contractors and limited companies across the West Midlands. We handle VAT registration and returns, bookkeeping and MTD-compliant record-keeping on fixed monthly fees agreed upfront, with every deadline tracked.
If you’re approaching the threshold or you think you may have already crossed it and missed the deadline, book a free consultation or message us on WhatsApp. Late registration is far more fixable when you come to HMRC first.
📞 07754165406 · ✉️ info@atbsolutions.co.uk · 526 Coventry Road, Birmingham B10 0UN
