UK VAT Threshold Explained 2026/27

The VAT registration threshold is the level of taxable turnover at which a business must register for VAT with HMRC. For 2026/27, the threshold is £90,000.

If your taxable turnover exceeds £90,000 in any rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days alone, you must register for VAT.

You must register for VAT if:

• Your taxable turnover in the last 12 months exceeded £90,000
• You expect your taxable turnover to exceed £90,000 in the next 30 days

The threshold test is not based only on your accounting year, tax year or the previous calendar year. At the end of each month, look back over the previous 12 months and total your taxable turnover. As older months drop out and new months enter, the total changes.

For example, if taxable turnover for the 12 months to 31 July reaches £92,000, the business has crossed the £90,000 threshold even if turnover since 6 April is much lower. You normally need to tell HMRC within 30 days of the end of the month in which you exceeded the threshold.

Keep a simple monthly turnover schedule rather than waiting for year-end accounts. Fast-growing or seasonal businesses may want to review the figure more frequently so the registration deadline is not missed.

A second test applies when you expect taxable turnover to exceed £90,000 in the next 30 days alone. This is not another rolling calculation. It can be triggered by a large contract, order or one-off supply that you know will be made within that period.

When this test applies, the timing and effective date differ from the backward-looking test. Check HMRC's registration guidance promptly rather than waiting for the sale to appear in completed accounts.

Taxable turnover includes the total value of everything you sell that is not VAT-exempt. This includes goods and services at the standard rate (20%), reduced rate (5%), and zero rate (0%).

It does not include VAT-exempt sales, income from outside the UK (in most cases), or non-business income.

A business selling £70,000 of standard-rated services and £25,000 of zero-rated goods has £95,000 of taxable turnover for this test. Zero-rated sales carry 0% VAT, but they are still taxable supplies and normally count towards registration turnover.

By contrast, exempt income is not simply a 0% sale. Exempt supplies generally sit outside taxable turnover and can affect recovery of VAT on related costs. Some receipts may not be consideration for a supply at all. Classification therefore comes before addition: a bank total, profit figure or Self Assessment turnover box is not automatically the right VAT-threshold figure.

Include the value of taxable supplies before VAT. If you operate through more than one activity or business arrangement, connected-business and artificial-separation rules may need professional review. Do not split one economic business merely to keep each part below the threshold.

Under the backward-looking test, a business identifies the month-end when the rolling 12-month taxable turnover first exceeded £90,000 and normally tells HMRC within 30 days of that month-end. The effective registration date is normally the first day of the second month after the threshold was exceeded.

The next-30-days test is different. When the business expects taxable turnover above £90,000 in that 30-day period alone, it normally must notify HMRC by the end of that period and registration takes effect from the date the expectation arose. Because the trigger and effective date differ, a large known contract should not be put through the backward-looking timetable.

Once registered, you must charge VAT on your taxable sales, submit VAT returns (usually quarterly), and pay any VAT owed to HMRC. You can also reclaim VAT on eligible business purchases.

Registration does not mean every sale carries 20% VAT. You still need to classify supplies correctly, issue the required records and separate output VAT collected from eligible input VAT. Cash-flow planning matters because VAT collected from customers is not business income.

If taxable turnover later falls, deregistration is not automatic. A separate deregistration threshold and eligibility rules apply, so check the current HMRC guidance before cancelling a registration.

Registering below the threshold can allow recovery of eligible input VAT, but it also creates administration and may change customer-facing prices. A business selling mainly to VAT-registered customers may be able to add VAT without increasing the customer's final cost when that customer can recover it. A consumer-facing business may have to raise the gross price or absorb some of the VAT.

Before registering voluntarily, estimate VAT on sales, recoverable VAT on costs, software and filing work, pricing effects, and whether customers can reclaim VAT. Also check whether supplies are standard-rated, reduced-rated, zero-rated or exempt; high costs do not automatically mean all input VAT is recoverable.

Voluntary registration brings the same record-keeping, invoicing, return and payment duties as compulsory registration. It should be a business decision based on the actual supply chain, not an automatic response to seeing VAT on purchase receipts.

1. Record taxable sales by month, separating exempt and non-business receipts.
2. At every month-end, total the previous 12 months rather than only the current tax or accounting year.
3. Track signed contracts and known one-off supplies that could trigger the next-30-days test.
4. Keep evidence for the VAT treatment applied to unusual or zero-rated supplies.
5. Escalate before the threshold is crossed so pricing, invoices, software and customer communication are ready.

The VAT calculator can add or extract a known rate from an amount, but it does not monitor turnover or choose the correct tax treatment. A bookkeeping report that preserves the monthly rolling total is the better control for registration.

Once registration looks likely, map which sales are standard-rated, reduced-rated, zero-rated or exempt, and identify which customers expect VAT-inclusive prices. Update quotes, contracts, invoice templates and bookkeeping codes so the effective date does not create inconsistent records.

Forecast the cash impact separately from profit. VAT collected from customers may later be payable to HMRC, while input VAT recovery depends on valid evidence and the applicable rules. A growing bank balance after registration is not proof that the VAT element is available to spend.

Also decide who will prepare returns, how source documents will be retained and how errors will be escalated. The registration threshold answers when a duty may begin; it does not choose a VAT scheme, accounting basis or filing process. Review those choices against current HMRC guidance and the facts of the business.

Your VAT obligations can vary depending on your business structure (sole trader, partnership, limited company) and the type of goods or services you sell. Some supplies are exempt, some are zero-rated, and some fall under special schemes like the Flat Rate Scheme.

If your business involves mixed supplies or you're unsure whether your turnover counts towards the threshold, it's worth checking HMRC's guidance or speaking to an accountant.

Keep the legal entity and its supplies at the centre of the review. A sole trader's activities, a partnership and a limited company are not interchangeable merely because the same owner or brand is involved. Changes in structure, acquisitions or connected operations should be reviewed before assuming an old monitoring schedule still applies.