Once your taxable turnover passes £90,000 you must register for VAT. Here is how the rolling 12-month test works, the 30-day forward look that trips up so many traders, and when you can deregister.
The VAT registration threshold is one of the most consequential numbers in the UK tax system for growing small businesses. Cross it, and you must charge 20% VAT on most of what you sell, file regular VAT returns, and keep digital records. For 2025/26 the threshold is £90,000 of taxable turnover, and the rules around how and when you cross it are more subtle than most traders realise.
Getting the timing right matters because registering late carries penalties and means you may have to account for VAT on sales you have already made without charging it. Registering at the right moment, on the other hand, can be a sign of a healthy, growing business, and in some cases registering voluntarily before you hit the threshold is the smart move.
The VAT registration threshold for 2025/26 is £90,000. This figure rose from £85,000 on 1 April 2024, the first increase in seven years, and has stayed at £90,000 ever since. The related deregistration threshold is £88,000.
The threshold is measured against your VAT-taxable turnover, which is the total of everything you sell that is not exempt from or outside the scope of VAT. It includes sales at the standard rate (20%), the reduced rate (5%) and the zero rate (0%). It excludes genuinely VAT-exempt income such as most insurance, finance and certain education and health services.
There are two completely separate triggers for compulsory registration, and you must check both.
At the end of every month, look back at your taxable turnover over the previous 12 months. This is a rolling window, not the tax year. If the total exceeds £90,000 at any month-end, you must register. You then have 30 days from the end of that month to tell HMRC, and your registration takes effect from the first day of the second month after you went over.
| Month-end check | Rolling 12-month turnover | Action |
|---|---|---|
| 30 Sept 2025 | £87,000 | No action |
| 31 Oct 2025 | £91,500 | Threshold crossed; register within 30 days |
| Registration effective | 1 Dec 2025 | Start charging VAT |
Separately, if at any point you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately, with effect from the date you formed that expectation. This typically arises when you win a single large contract. If you sign a deal on 5 January to deliver £95,000 of work within the month, you must register before that 30-day period begins, even if your trailing 12 months were modest.
Many sole traders only know about the first test and are caught out by the second when a big order lands.
You must register if either test is met. You may register voluntarily even when your turnover is below £90,000. Voluntary registration can make sense when:
It rarely makes sense for businesses selling mainly to consumers who cannot reclaim VAT, because adding 20% to your prices makes you less competitive, or eats into your margin if you absorb it.
Registration is done online through HMRC, usually via your business tax account. You will need details of your turnover, business activities and bank account. Once registered, you receive a VAT registration number, must charge VAT on your taxable sales, and must file VAT returns (usually quarterly) through Making Tax Digital compatible software.
Because all VAT-registered businesses are within Making Tax Digital for VAT, you cannot simply type figures into an old portal. You must keep digital records and submit returns through compatible software. If the wider digital tax regime is unfamiliar, the explainer on what Making Tax Digital is sets out how the digital filing rules work in practice. The VAT calculator helps you work out the VAT on a given sale once you are registered.
Liam is a self-employed kitchen fitter. His monthly takings through 2025 average around £7,000, but a strong autumn pushes them up.
If Liam had missed the deadline and carried on without registering, HMRC could charge him VAT on the sales he made after he should have registered, plus a failure-to-notify penalty, even though he never collected that VAT from his customers. This is why monitoring the rolling 12-month total each month is so important for businesses near the threshold.
Once registered, many small businesses consider the Flat Rate VAT Scheme, which lets you pay a fixed percentage of your gross turnover to HMRC instead of accounting for VAT on every transaction. The Flat Rate Scheme has its own joining threshold (you can join if your VAT-taxable turnover is expected to be £150,000 or less, excluding VAT) and a separate exit threshold. The decision about whether to use it depends on how much VAT you incur on purchases, and is explained fully on the Flat Rate VAT Scheme guide.
It is worth being clear that the VAT registration threshold is entirely separate from the income tax and Making Tax Digital for Income Tax thresholds. A sole trader can be required to register for VAT at £90,000 of turnover while their MTD for Income Tax obligation is triggered by a different measure of qualifying income (£50,000, £30,000 or £20,000 in phases from April 2026). The two regimes use different numbers and different start dates, and a busy sole trader may find themselves dealing with both.
A well-known quirk of the VAT system is the cliff edge: a business turning over £89,000 pays no VAT, while one at £91,000 must add 20% to its prices or absorb the cost. This creates a real incentive for some small businesses, particularly those selling to consumers, to keep turnover deliberately below £90,000. While that is a legitimate commercial choice, artificially splitting a business into separate entities to stay below the threshold (known as disaggregation) is something HMRC actively challenges. If your business is genuinely growing, planning ahead for registration, including how you will price and how you will file digitally, is far better than trying to engineer your way around the line.
The VAT threshold is a rolling target, not an annual one. The businesses that get caught out are the ones still thinking in tax years while their trailing 12 months quietly creeps past £90,000.
TapTax connects to your bank, categorises expenses automatically, and submits quarterly updates to HMRC. Free plan, no card required.
