I've watched dozens of growing businesses hit the £90k threshold in panic mode. Most of them should have registered six months earlier. A few should never have registered at all. The difference comes down to who your customers are.
The 2026 thresholds
For the 2026/27 tax year, the UK VAT registration thresholds are unchanged from April 2024:
| Threshold | Amount | What it means |
|---|---|---|
| Compulsory registration | £90,000 | You must register if your taxable turnover exceeds this in any rolling 12-month period |
| Deregistration threshold | £88,000 | You can deregister if turnover falls below this for the next 12 months (this is voluntary, not compulsory) |
| Voluntary registration | No minimum | You can register at any turnover, including zero |
The compulsory threshold rose from £85,000 to £90,000 in April 2024 and has stayed put since. The Office of Budget Responsibility expects it to remain at £90,000 through to at least April 2027 unless the policy changes.
How HMRC measures the £90,000 (this is where most people get it wrong)
The threshold is measured on a rolling 12-month basis, not a tax year. At the end of each month you should be looking back at the past 12 months and asking: did my taxable turnover exceed £90k?
"Taxable turnover" includes:
- Standard-rated sales (anything you'd charge 20% on)
- Reduced-rated sales (5%)
- Zero-rated sales (0%) — yes, these count even though you don't charge VAT
It excludes:
- Exempt sales (insurance, education, certain financial services)
- Sales outside the scope of UK VAT (most B2B services to non-UK customers)
- Sale of capital assets like vehicles or equipment
The trap: you also need to register if you expect to exceed £90k in the next 30 days alone (the "future test"). A single big contract win can trigger registration before your rolling 12-month figure ever crosses the line.
Four cases for voluntary registration
1. You sell mostly B2B to VAT-registered customers
Your customers can reclaim the VAT you charge them, so the 20% you add doesn't actually cost them anything. Meanwhile, you can reclaim VAT on all your business inputs (software, equipment, professional fees). This is a near-pure win.
2. You sell zero-rated goods or services
Zero-rated means you charge 0% but are still treated as VAT-registered for input tax purposes. You can reclaim all your input VAT and have no output VAT to pay. If you sell mostly zero-rated stuff (children's clothing, books, exports of goods), voluntary registration is almost always the right call.
3. You're investing heavily up front
A consultancy buying £15k of new equipment in year one can reclaim £2,500 of VAT on that purchase if registered. If your customers are mostly VAT-registered businesses, this is found money.
4. Credibility
Some larger customers won't engage with non-VAT-registered suppliers because it signals "small". I've sat in meetings where this came up explicitly. If you're targeting enterprise clients, voluntary registration removes a friction point.
Three cases against
1. You sell mostly to consumers (B2C)
Your customers can't reclaim VAT, so adding 20% either makes you 20% more expensive or compresses your margin by 20%. Both are bad. Most B2C service businesses (hairdressers, personal trainers, cleaners) should stay below the threshold for as long as commercially possible.
2. Your input VAT is tiny
If you're a one-person service business with under £5k of VAT-able expenses a year (laptop, phone, software), the maths almost never works in your favour if your customers are consumers. The admin overhead exceeds the recovery.
3. You're flat-rate eligible but voluntarily registering at low turnover
The Flat Rate Scheme can be punitive if your input VAT is high relative to the flat rate percentage. Run the numbers in our flat rate calculator before opting in.
The break-even calculation
Here's a simple way to think about whether voluntary registration helps. Compare two numbers:
- Annual input VAT you'd recover if registered (e.g. 20% of your VAT-able expenses)
- Annual cost of charging VAT to your customers (zero if all B2B-VAT-registered, up to 20% of revenue if all consumer)
If (1) > (2), register voluntarily. If (2) > (1), don't.
Worked example
A B2B consultant turning over £60k with £8k of VAT-able expenses, selling 100% to VAT-registered businesses:
Cost of charging VAT to customers: £0 (they reclaim it). Recovery on inputs: £1,333 (VAT element of £8k of VAT-inclusive expenses, i.e. £8,000 ÷ 6). Net annual benefit of voluntary registration: +£1,333.
The "VAT cliff" trap (and what to do about it)
A B2C business sitting at £88k of turnover faces a brutal jump. Cross £90k and you must charge 20% VAT on everything from that point. To preserve your prices, you absorb the 20%. To preserve your margin, you raise prices 20% and risk losing customers.
The result: many small businesses deliberately cap turnover at £88–89k to avoid registering. HMRC publishes data showing a noticeable "bunching" of businesses just below the threshold every year, so they're well aware of this.
Three ways to deal with the cliff:
- Plan to grow through it. If you're going to cross £100k+ within a year, the pain is short-lived. Bite the bullet.
- Split your business. Tempting but high-risk — HMRC's "business splitting" or "disaggregation" anti-avoidance rules can catch this. Get advice before trying.
- Stay deliberately small. A perfectly legitimate choice for many lifestyle businesses.
How to register
Registration is online via the HMRC portal. You'll need:
- Your business details (name, address, trading name if different)
- Bank details for refunds
- UTR (if you have one)
- An estimate of your taxable turnover for the next 12 months
- Date you want registration to start (can be in the past for compulsory, must be future-dated for voluntary)
Processing typically takes 10–30 days. You'll get a VAT number, an effective date of registration, and your first return period. Start on gov.uk here.
FAQ
What happens if I miss the registration deadline?
You're liable for VAT from the date you should have registered, even though you didn't charge it. HMRC will also issue a penalty (usually 5–15% of the VAT due, depending on lateness). Worst case: you owe HMRC the VAT you should have charged but never did, out of your own pocket.
Can I deregister later if it doesn't work out?
Yes. If your turnover drops below £88,000 (the deregistration threshold) you can apply to leave. You'll need to account for VAT on any business assets you keep that are worth more than £6,000 in total (the "deemed supply" rule).
Does the threshold include VAT?
No. The £90,000 figure is your net VAT-able turnover, not the gross VAT-inclusive figure.
What if I have multiple businesses?
If they're operated as separate legal entities (different limited companies), each has its own threshold. If you operate two trades as a single sole trader, all your turnover counts towards one £90k threshold. HMRC has anti-avoidance rules to prevent artificial splitting — see "disaggregation" guidance.
Sources & further reading
All claims in this article are checked against the following primary sources. Last verified 28 April 2026.
- HMRC – VAT registration thresholds
- HMRC – Register for VAT
- HMRC – VAT rates for businesses
- VAT Notice 700/1: Should I be registered for VAT?
About the editorial team
Reverse VAT Calculator Editorial Team
Every article on this site is written by a UK-qualified accountant (ACCA, FCCA, ACA or CTA) and reviewed by a second qualified team member before publication. Articles are dated, sourced from primary HMRC guidance, and updated when rules change.
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