Once your rolling 12-month taxable turnover passes £90,000, VAT registration stops being optional and becomes a legal requirement.
The VAT threshold is the single number every growing sole trader watches most nervously. Cross it and you must start charging 20% VAT on your sales, file VAT returns, and effectively become an unpaid tax collector for HMRC. For 2025/26 that line sits at £90,000 of VAT-taxable turnover, where it has stayed since the April 2024 rise from £85,000.
The most misunderstood part of the VAT threshold is that it ignores the tax year entirely. HMRC asks you to look back over any consecutive 12 months. At the end of each month you add up your taxable turnover for the previous 12 months. The moment that figure passes £90,000, the clock starts.
There is also a second, forward-looking trigger. If at any point you realistically expect your taxable turnover in the next 30 days alone to exceed £90,000, for example because you have just won a large contract, you must register straight away without waiting for the rolling total to catch up.
"VAT-taxable turnover" means sales of goods and services that are not exempt from VAT. It includes standard-rated, reduced-rated, and zero-rated supplies, but excludes genuinely exempt items such as most insurance and some financial services.
Imagine Tariq runs a freelance web-design business. His monthly taxable turnover for the 12 months to 31 March 2026 looks like this: eleven months at around £7,000 each, then a bumper March where he invoices £15,000 for a big project.
Adding it up, his rolling 12-month total reaches £92,000 at the end of March. He has crossed the £90,000 line. HMRC's rule is that he must register within 30 days of the end of the month in which he went over, so by the end of April 2026. His VAT registration then takes effect from the first day of the following month, 1 May 2026.
From that date Tariq must add 20% VAT to his invoices. A £1,000 design job now bills at £1,200, of which £200 is VAT he holds on HMRC's behalf. The upside is that he can reclaim the VAT on his own business costs, such as software subscriptions and his new laptop.
If Tariq misses the deadline, HMRC can register him retrospectively and demand the VAT he should have charged, even if he never collected it from clients, plus a failure-to-notify penalty.
Once registered, you use our VAT calculator to work out what to charge and what you can reclaim. Every VAT-registered business must comply with Making Tax Digital for VAT: keeping digital records and filing returns (usually quarterly) through MTD-compatible software. There is no longer a turnover exemption from MTD for VAT.
If your turnover later drops below the £88,000 deregistration threshold, you can apply to leave the VAT register, though many traders stay registered to keep reclaiming input VAT.
The businesses that get caught out are rarely the ones near £200,000. It is the ones hovering at £88,000 to £92,000 who forget to check their rolling total each month.
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