VAT Registration Threshold
The level of taxable turnover above which businesses must register for VAT, currently £90,000 per rolling 12-month period. Once registered, businesses must charge VAT on taxable supplies, file regular VAT returns, and keep VAT records. Businesses below the threshold can register voluntarily, which may be beneficial if they have significant VAT on purchases to reclaim.
How it works
The £90,000 threshold is tested on a rolling 12-month basis, not against the fixed tax year or calendar year — meaning you need to check your turnover for the trailing twelve months at the end of every month, not just once a year. A business can cross the threshold partway through any month, which is why HMRC expects ongoing monitoring rather than an annual check.
Only taxable turnover counts towards the threshold — sales of standard-rated, reduced-rated, and zero-rated goods and services all count, but VAT-exempt sales and income from outside the scope of VAT, such as some grants, don't. This distinction matters for businesses with a mixed income stream, since it's possible to have high total revenue while still being some way below the taxable-turnover threshold.
Registering voluntarily before you're required to can make sense if you buy a lot of standard-rated supplies and want to reclaim the input VAT, or if your customers are mostly VAT-registered businesses that won't be put off by an added 20% on your invoices. The trade-off is the extra compliance burden — VAT returns, record-keeping, and Making Tax Digital requirements — which is why many small businesses deliberately stay below the threshold as long as it makes commercial sense.
Example: crossing the threshold on a rolling 12-month basis
A business has quarterly taxable turnover of £20,000, £25,000, £22,000, and £24,000 across four consecutive quarters — a rolling annual total of £91,000. Even though no single quarter looks especially large, the trailing 12-month total has crossed the £90,000 registration threshold.
This means the business must register for VAT based on the month it actually crossed the line, not wait until its next tax year or accounting year-end — the rolling test applies continuously throughout the year.
Frequently asked questions
Is the VAT registration threshold based on the tax year?
No — it's tested on a rolling 12-month basis that's recalculated continuously, so you need to check your trailing twelve months' turnover regularly rather than only at the end of a fixed tax or accounting year.
Does turnover from VAT-exempt sales count towards the threshold?
No — only taxable turnover (standard, reduced, and zero-rated sales) counts towards the £90,000 threshold; exempt supplies and income outside the scope of VAT are excluded from the calculation.
Is there any benefit to registering for VAT before I'm required to?
Yes, potentially — voluntary registration lets you reclaim VAT on business purchases and can look more credible to VAT-registered business customers, though it also means charging VAT on your own sales and taking on the ongoing compliance burden of returns and record-keeping.
Related Terms
Value Added Tax
A consumption tax charged at each stage of production and distribution on goods and services, with the final burden falling on the end consumer.
Standard Rate VAT
The main VAT rate of 20% applied to most goods and services sold in the UK by VAT-registered businesses.
VAT Return
A periodic report that VAT-registered businesses must submit to HMRC, typically quarterly, showing the VAT they have charged customers and the VAT they have paid on purchases.
Flat Rate Scheme
A simplified VAT accounting method for small businesses with an annual turnover below £150,000, where you pay a fixed percentage of your gross turnover to HMRC instead of accounting for input and output VAT separately.
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