The UK VAT registration threshold is £90,000. If your turnover goes over this in any rolling 12-month period, you must register. HMRC raised the threshold from £85,000 in April 2024.
This guide explains the threshold, what counts towards it, and what to do when you go over it.
What is the current VAT registration threshold in the UK?
The current VAT registration threshold is £90,000. It applies to your taxable turnover over any rolling 12-month period. You have 30 days to register once you cross it. HMRC raised it from £85,000 in April 2024. Missing the deadline can lead to a penalty and backdated VAT debt.
The 12 months HMRC checks do not follow your financial year. They move forward all the time. You need to check any consecutive 12-month period. If your turnover went over £90,000 at any point, you should have registered.
There is also a forward-looking rule. If you expect to reach £90,000 in the next 30 days, register straight away. Do not wait for it to happen.
According to HMRC’s VAT registration guidance, both rules apply. You cannot pick one and ignore the other.
What counts towards your VAT taxable turnover?
Your taxable turnover includes all VAT-taxable sales. That covers standard-rated (20%), reduced-rated (5%), and zero-rated (0%) goods and services. Exempt sales do not count. Investment income and dividends do not count either. Always check which category your income falls into before you work out your total.
What counts towards the threshold:
- Services sold to UK and overseas customers
- Physical goods sold in the UK
- Digital products sold to UK consumers
- Zero-rated items like most food and children’s clothing
What does not count:
- Residential rental income (usually exempt)
- Insurance and finance products (usually exempt)
- Dividend income from investments
If you sell both taxable and exempt goods, only the taxable sales count. Keep them separate in your records from the start.
What happens when you exceed the VAT threshold?
Register within 30 days of the end of the month you crossed £90,000. Your VAT starts from the first day of the second month after that. Late registration can lead to a penalty and backdated VAT debt. HMRC also finds unregistered businesses through its own data.
Once you are registered, you charge VAT on your sales. You send VAT returns to HMRC, usually every quarter. You can also reclaim VAT on most business purchases.
You will need Making Tax Digital for VAT software from your first return. HMRC no longer accepts manual submissions or spreadsheet-only filing.
Most businesses use an accountant for their first few returns. DASA’s VAT return service covers setup, quarterly submissions, and MTD compliance.
Partial exemption rules and the construction reverse charge catch many newly registered businesses out. Get the structure right from the start.
Can you voluntarily register for VAT below the threshold?
Yes. You can register at any time, even if your turnover is £0. There is no minimum. Voluntary registration makes sense when most of your clients are VAT-registered businesses. They can reclaim the VAT you charge them, so it does not cost them anything extra.
Voluntary registration works well for:
- B2B businesses with mostly VAT-registered clients
- Businesses with high purchase costs and lots of input VAT to reclaim
- New businesses that want to look more established from day one
It works less well for:
- B2C businesses where customers pay the full VAT cost
- Low-margin businesses where adding 20% to prices hurts sales
When you register a limited company, sort out VAT registration at the same time. Many new limited companies register for VAT from day one, even below the threshold.
Does the VAT threshold apply to turnover or profit?
The threshold applies to turnover, not profit. Your costs do not count in the calculation. If taxable sales hit £90,000 in any 12-month period, you must register. It does not matter how little you keep after expenses. HMRC looks at gross taxable sales only.
This catches many sole traders off guard. A business with £95,000 in sales still has to register. Tight margins do not change the rule. Your take-home pay is irrelevant.
The same rule applies to sole traders, partnerships, and limited companies. No business structure gets an exemption based on profit.
What is the VAT deregistration threshold?
The deregistration threshold is £88,000. That is £2,000 below the registration threshold. You can ask HMRC to cancel your VAT registration at any time, but only if you expect turnover to stay below £88,000. It is not a fix for one bad year.
If you deregister and turnover rises again, re-register when you reach £90,000.
See HMRC’s VAT deregistration rules for how to cancel your registration.
This article is a general guide to UK VAT registration rules. Tax thresholds and rules change. Speak to a qualified accountant before making VAT decisions for your business.
Need help with VAT registration or your quarterly returns? Speak to our team about DASA’s VAT service.