- Mandatory registration threshold: £90,000 in any rolling 12-month period
- Must notify HMRC within 30 days of exceeding the threshold
- Late registration penalty: 5–15% of net VAT due from the date you should have registered
- Deregistration threshold: £88,000
- Voluntary registration available at any turnover level
The 2026-27 registration threshold
The VAT registration threshold is £90,000 of VAT-taxable turnover in any rolling 12-month period. This threshold has been frozen since April 2024 (increased from £85,000). There is no indication of a further change for 2026-27.
The threshold applies to your VAT-taxable supplies only — not all income. Zero-rated supplies (some food, books, children's clothing, most exports) count toward the threshold even though no VAT is charged. Exempt supplies (financial services, certain medical, education, insurance) do not count toward it at all.
Understanding the rolling 12-month test
The test is a rolling 12-month total — not a calendar year, tax year, or financial year. At the end of each month, add up your VAT-taxable turnover for the preceding 12 months. If that total exceeds £90,000, you have crossed the threshold.
Worked example: crossing the threshold
| Month | Monthly revenue | Rolling 12-month total | Threshold breached? |
|---|---|---|---|
| Jan 2026 | £8,000 | £84,000 | No |
| Feb 2026 | £8,000 | £88,500 | No |
| Mar 2026 | £9,500 | £93,000 | YES — register within 30 days |
In this example, the threshold is crossed in March 2026. The director must notify HMRC by 30 April 2026 and register for VAT. The effective registration date would typically be 1 May 2026.
What happens if you miss the deadline
HMRC charges a late registration penalty based on the VAT that should have been collected from the date you should have registered:
| How late? | Penalty rate |
|---|---|
| Up to 9 months late | 5% of net VAT due |
| 9–18 months late | 10% |
| More than 18 months late | 15% |
| Deliberate failure | Up to 100% of VAT due |
If you failed to charge VAT on invoices after you should have been registered, you still owe the VAT — calculated as 1/6 of the VAT-inclusive amount (i.e., HMRC treats your invoiced amount as VAT-inclusive). You may be able to recover this from clients who are VAT-registered, but it is administratively difficult and can damage relationships.
Watch out: Monitor your rolling 12-month turnover each month. Many directors are surprised when they cross the threshold because they are thinking in annual rather than rolling terms. A busy quarter can push you over even if your previous 12 months looked comfortable.
Should you register voluntarily?
You can register for VAT at any turnover level. Whether it makes sense depends on your clients:
| Client type | Voluntary registration | Reason |
|---|---|---|
| VAT-registered businesses (B2B) | Usually beneficial | Clients reclaim your VAT — no cost to them. You reclaim input VAT on your purchases. |
| Consumers (B2C) | Usually not beneficial | Clients cannot reclaim VAT — your prices effectively rise by 20%. |
| VAT-exempt businesses | Usually not beneficial | Exempt businesses (e.g., insurance, finance) cannot reclaim VAT. |
| Mixed | Assess case by case | Depends on proportion of B2B vs B2C and level of input VAT to reclaim. |
Pre-registration VAT reclaim
Once registered, you can reclaim VAT on certain pre-registration purchases:
- Goods: up to 4 years before registration date, if still held on the registration date
- Services: up to 6 months before registration date
This can result in a useful one-off VAT reclaim when you register — particularly for equipment, software subscriptions paid in advance, or professional fees. Claim on your first VAT return.
Deregistration
You can deregister voluntarily when your VAT-taxable turnover falls below £88,000 and you reasonably expect it to remain below that level. On deregistration, you may need to account for VAT on assets still held by the business — seek advice before deregistering if you hold significant VAT-bearing assets.
Common mistakes
- Thinking in annual rather than rolling terms — a very common error. Monitor monthly.
- Not counting zero-rated supplies — exports, some digital services, and other zero-rated supplies count toward the threshold even though no VAT is charged.
- Forgetting to charge VAT from the effective date — once registered (or required to be registered), VAT must be charged on all relevant invoices from that date. Retrospective invoicing is difficult and costly.
- Missing the pre-registration reclaim — the 4-year goods / 6-month services reclaim on your first VAT return is a genuine one-off saving that many directors overlook.
Use the calculator
Frequently asked questions
Does the £90,000 threshold apply to all income?
What happens if I miss the registration deadline?
Can I claim VAT back on pre-registration expenses?
What if my clients are a mix of VAT-registered and unregistered?
Can I deregister if my turnover drops?
Important: This guide is for general information only and does not constitute tax or legal advice. Tax rules change — always verify current rates and thresholds with HMRC or a qualified accountant before making decisions.