When do I need to register for VAT?

The short answer: you must register for VAT once your taxable turnover goes over £90,000 in any rolling 12 months. You then have 30 days from the end of that month to register. You must also register at once if you expect to take more than £90,000 in the next 30 days alone.

The two tests

• Looking back: at the end of every month, add up your VAT taxable sales for the last 12 months. If the total is over £90,000, register within 30 days of the end of that month. Your registration then starts from the first day of the month after.
• Looking forward: if at any point you expect your sales in the next 30 days alone to be over £90,000, register by the end of those 30 days. This catches one-off big contracts.

Example: your sales for the 12 months to 31 July go over £90,000. You must register by 30 August, and charge VAT from 1 September.

What counts towards the £90,000

• Counts: sales at the standard 20%, reduced 5% and zero rates. Zero-rated sales, such as most food and children's clothes, still count.
• Does not count: VAT-exempt sales such as most insurance, education, health care and residential rent, and sales outside the scope of UK VAT.
• It is turnover, not profit. A business with £95,000 of sales and £20,000 of profit is over the threshold.
• It is per person, not per business. A sole trader running two businesses adds both together. A limited company is a separate legal person, so its sales are counted on their own.

What registering costs if you sell to the public

If your customers are consumers and you cannot raise your prices, the VAT comes out of what you already charge: one sixth of every pound.

That is why a business just over the threshold can end up with less than one just under it. You can reclaim VAT on your business costs, which softens the hit, and the Flat Rate Scheme can help small businesses. If your customers are VAT-registered businesses, they claim the VAT back, so it costs them nothing.

Should you register voluntarily?

• Worth it if you mainly sell to VAT-registered businesses, you have big start-up costs with VAT on them, or you sell mostly zero-rated goods and could reclaim VAT on costs.
• Not worth it if you sell mainly to the public and could not raise prices, or you want to avoid the extra admin.

Once you are registered

• Charge VAT on your sales and show your VAT number on invoices.
• File a VAT return, usually every quarter, using Making Tax Digital software.
• Pay the VAT due one month and seven days after the end of each quarter.
• If your sales fall below £88,000 over the next 12 months, you can ask to deregister.

VAT schemes for small businesses

• Flat Rate Scheme: pay a fixed percentage of your VAT-inclusive turnover, depending on your trade. It is open if your expected turnover is £150,000 or less, excluding VAT. If you spend very little on goods, a higher 16.5% rate may apply.
• Cash accounting: pay VAT when your customers pay you, not when you invoice. Helpful if clients pay late.
• Annual accounting: one return a year with advance payments.

If you have missed the deadline

Register as soon as you can. You owe VAT from the date you should have been registered, worked out on the sales you made since, even though you did not charge customers for it. HMRC can also add a penalty based on the VAT due. Telling them before they find out usually keeps the penalty lower. Remember VAT is separate from your income tax bill and payments on account.

UK VAT rates

Selling to businesses or the public

Who your customers are decides how much registering hurts.

• Selling to businesses: a consultant charging £30,000 a year adds £6,000 VAT. Their VAT-registered clients claim it back, so it costs them nothing. The consultant can also reclaim VAT on laptops, software and travel, so registering early often makes sense.
• Selling to the public: a hairdresser cannot easily add 20% to prices. If prices stay the same, one sixth of the takings goes to HMRC, as the table above shows. Businesses in this position often watch the threshold closely.

How to register

1. Register online through your HMRC business tax account. You will need your UTR or company number, bank details, turnover and a description of what you sell.
2. Choose your effective date of registration: the date you must register from, or an earlier date if registering voluntarily.
3. Wait for your VAT number, usually a few weeks. Until it arrives, raise prices to include VAT but do not show VAT on invoices. Reissue proper VAT invoices once you have the number.
4. Sign up for Making Tax Digital software to keep records and file returns.

Reclaiming VAT from before you registered

On your first return you can usually reclaim VAT on goods bought in the 4 years before registration, if you still have them and use them in the business, such as equipment or stock. For services, the limit is 6 months. Keep the invoices.

Who cannot use the threshold

• Businesses based outside the UK selling taxable goods or services in the UK must register from their first sale, whatever their turnover.
• Businesses that only make exempt sales cannot register at all, so they cannot reclaim VAT on costs.
• Taking over a VAT-registered business as a going concern means looking at the previous owner's turnover too.

Retail schemes

Shops that sell a mix of standard, reduced and zero-rated goods can use a retail scheme to work out VAT from total takings instead of item by item. There are several, and the right one depends on your tills and the mix of what you sell.

Staying under the threshold

Some businesses close a few weeks a year, cap their bookings or turn down work to stay below £90,000. That is legal. What is not allowed is splitting one business into several, such as putting half the sales in a partner's name, purely to avoid VAT. HMRC can treat them as one business and backdate the VAT. If you are close to the line, check your rolling 12-month total every month, not just at year end.

Penalties for registering late

If you register late, HMRC can charge a penalty worked out as a percentage of the VAT you should have paid. It is lower if the mistake was careless and you told HMRC yourself, and higher if HMRC thinks it was deliberate or found it first. You also owe the VAT itself, plus interest. The sooner you act, the smaller the bill.

Deregistering

You can ask to cancel your registration if you expect taxable sales in the next 12 months to be £88,000 or less, or if you stop trading. You must cancel within 30 days if you stop making taxable sales. When you deregister, you may have to pay VAT on stock and assets you still hold if the VAT would be more than £1,000.

This is general information, not tax advice. Thresholds are for 2026/27 and apply across the UK.