VAT Registration Threshold: The £90,000 Rules Explained

The current UK VAT thresholds

The VAT registration threshold is £90,000 of taxable turnover and the deregistration threshold is £88,000. HMRC raised both on 1 April 2024, from £85,000 and £83,000. These figures were still current when we last checked GOV.UK on 27 September 2026.

The threshold is a test of turnover, not profit. A business with thin margins can pass £90,000 of sales long before it makes £90,000 of profit, so it pays to track the figure every month.

The rolling 12-month test (looking back)

At the end of every month, add up your VAT taxable turnover for the previous 12 months. If the total is over £90,000, you must register. The test is not based on the tax year or the calendar year: it rolls forward one month at a time.

Under the rolling 12-month rule you have 30 days from the end of the month in which you went over the threshold to register. Your registration then takes effect from the first day of the second month after you went over.

GOV.UK gives this example: if your 12-month taxable turnover went over £90,000 on 15 July, you must register by 30 August, and your effective date of registration is 1 September. From 1 September you charge VAT on your sales.

Here is how a growing business might cross the line. The figures are an illustration, not HMRC data.

The forward 30-day test (looking ahead)

You must also register if you expect your taxable turnover to go over £90,000 in the next 30 days alone. This test catches a single large order or contract, even if your past sales were small.

Under the 30-day rule you register by the end of that 30-day period, and the effective date is the date you realized you would go over. GOV.UK's example: if on 1 May you arrange a £100,000 contract that will be paid in the next 30 days, you must register by 30 May, and your registration is effective from 1 May.

The forward test matters most for new businesses. A company formed last month with no sales history can still have to register straight away if it signs a large contract.

What counts as taxable turnover

Taxable turnover is the total value of everything you sell that is not VAT exempt or outside the scope of VAT. According to HMRC's registration guidance, it includes:

• standard-rated, reduced-rated and zero-rated goods and services
• goods you hired or loaned to customers
• business goods used for personal reasons
• goods you bartered, part-exchanged or gave as gifts
• services you received from businesses abroad that you have to reverse charge
• building work over £100,000 that your business did for itself

Zero-rated sales count toward the £90,000 even though you charge 0% VAT on them. A business that sells mostly zero-rated goods can apply for an exemption from registration. For NETPs this is only possible if all of their taxable supplies are zero-rated.

Exempt and outside-the-scope supplies

Exempt supplies and outside-the-scope supplies do not count toward the threshold. If you only sell VAT exempt or out of scope goods and services, you do not have to register.

HMRC lists these as VAT exempt:

• financial services, investments and insurance
• many supplies of property, land and buildings
• education and training (excluding private schools)
• healthcare and medical treatment
• funeral plans, burial or cremation services
• charity events, antiques, gambling or lottery tickets, and sports activities
• garages, parking spaces and houseboat moorings

Outside the scope of VAT means the transaction is not part of the UK VAT system at all. HMRC's examples include goods or services bought and used outside the UK, statutory fees such as the London congestion charge, goods sold as part of a hobby, and donations to a charity given without anything in return.

The difference matters. Exempt sales are business supplies that carry no VAT, and VAT on costs can only be reclaimed where the costs relate to taxable supplies. Outside-the-scope items are not supplies for UK VAT purposes. If you are unsure how your own income is treated (for example, services to overseas customers), ask a qualified tax adviser before you rely on it.

Going over the threshold temporarily

If your taxable turnover goes over £90,000 because of a one-off spike, you can apply for a registration exception. HMRC reviews the request and either grants the exception or registers you. You still have to tell HMRC within the normal time limit; the exception is something you ask for, not something you can assume.

Non-established taxable persons: no threshold

A non-established taxable person (NETP) is a business with no UK establishment that makes taxable supplies in the UK. HMRC's manual says NETPs must notify HMRC of their liability to be registered regardless of the value of the taxable supply, and must register within 30 days of making, or expecting to make, their first UK taxable supply. The £90,000 threshold has not applied to them since December 2012.

This catches many founders abroad. HMRC also says that a UK incorporation alone does not make a UK establishment: it looks at where the business is actually managed and run. So a UK Ltd whose director lives and works in Lahore, Bengaluru or Dubai may be treated as a NETP, with no threshold, from its first UK taxable sale.

The £88,000 deregistration threshold also does not help businesses based outside the UK that still supply goods or services in the UK.

Voluntary registration: pros and cons

You can choose to register for VAT if your turnover is less than £90,000. It suits some businesses and costs others money.

Reasons to register early

• You can reclaim VAT on business costs. You can also reclaim VAT on purchases made before registration: up to 4 years for goods you still have, and up to 6 months for services, if they relate to your taxable business.
• Business customers who are VAT registered can usually reclaim the VAT you charge them, so adding VAT rarely hurts those sales.
• You remove the risk of missing the rolling or 30-day test as you grow.

Reasons to wait

• You must add VAT to your prices, at the standard rate of 20% for most goods and services. Consumers cannot reclaim it, so you either raise prices or absorb the cost.
• You must file VAT returns, usually quarterly, due one calendar month and 7 days after each period ends, even when there is nothing to pay.
• You must keep digital records and file through compatible software under Making Tax Digital for VAT.
• Late returns and payments bring penalties, and the admin does not stop until you deregister.

Our VAT registration service page explains how an application works in practice.

Late registration: what you owe and the penalties

If you register late, you must pay VAT on any sales you have made since the date you should have registered. If you did not charge VAT to customers in that period, the VAT usually comes out of your own margin.

HMRC can also charge a failure to notify penalty. For obligations arising on or after 1 April 2010, the old late registration penalty of 5% to 15% was replaced by the failure to notify regime. The penalty is a percentage of the "potential lost revenue" (broadly the VAT you should have paid). HMRC's factsheet CC/FS11 sets these ranges:

HMRC says that if you have a reasonable excuse for a non-deliberate failure, it will not charge a penalty. The lesson is simple: if you realize you should have registered, tell HMRC quickly.

After you register

Once registered you charge VAT from your effective date of registration, issue VAT invoices, keep digital records and file returns. If turnover later drops below £88,000 you can ask HMRC to cancel, and you must cancel within 30 days if you stop being eligible. Our VAT returns service covers the quarterly filing.

Registering yourself or using Borderless Filings

You can register for VAT yourself online with HMRC. Many UK-based sole traders and directors do. The hard part is usually not the form but the judgment around it: the correct effective date, whether a sale is exempt or outside the scope, and, for founders abroad, whether the business is a NETP.

Our filing team prepares and checks the application, submits it to HMRC, tracks it in your client portal and stores your documents securely (see how we protect documents). We then set reminders for your first return. We are not a tax adviser or accountancy firm: where your case needs a view on VAT establishment or the treatment of particular income, we will say so and suggest you speak to a qualified professional. No one can promise HMRC will approve an application or say how long it will take beyond what HMRC publishes.

Sources

• GOV.UK: Increasing the VAT registration threshold
• GOV.UK: VAT registration, when to register
• GOV.UK: Register for VAT
• GOV.UK: VAT thresholds
• GOV.UK: Cancel your VAT registration
• GOV.UK: When not to charge VAT
• GOV.UK: Reclaim VAT on business expenses
• HMRC: VAT Registration Manual VATREG37050
• HMRC: VAT Registration Manual VATREG37150
• HMRC: Compliance checks, penalties for failure to notify (CC/FS11)
• HMRC: Late VAT registration penalty (VAT Notice 700/41)
• GOV.UK: VAT rates
• GOV.UK: VAT Returns deadlines
• HMRC: VAT Notice 700/22, Making Tax Digital for VAT

Fees, deadlines and rules on this page were last checked on 27 September 2026.