What is the VAT Registration Threshold?
The UK VAT registration threshold is currently £90,000 of VAT-taxable turnover. A business generally needs to register if its taxable turnover for the previous 12 months exceeds £90,000, or if it expects to exceed the threshold within the next 30 days alone.
£90,000 is turnover, not profit
The threshold is based on turnover, which is the total value of taxable sales, not on profit. A business can have modest profit, or even be loss-making, and still be required to register for VAT if its sales are high enough. This is a common source of confusion for founders who instinctively think about their tax position in terms of profit.
Rolling 12 months, not financial year
The test is not based on your financial year or calendar year. It is based on a rolling 12-month period, meaning that at the end of every month a business should look back over the previous 12 months and check whether taxable turnover has gone over £90,000. This means the position needs to be reviewed continuously, not just once a year at year end.
What counts as taxable turnover
Taxable turnover includes standard-rated, reduced-rated and zero-rated sales. Zero-rated sales still count towards the threshold even though no VAT is charged on them, which surprises some business owners. Exempt sales are treated differently and are generally not included in the taxable turnover calculation.
Temporary threshold breaches
If turnover only briefly exceeds the threshold because of a one-off or unusual sale, it may be possible to apply to HMRC for a registration exception, provided you can show that taxable turnover in the next 12 months is expected to stay below the deregistration threshold. This is not automatic and needs to be requested and evidenced.
Voluntary registration below the threshold
A business does not have to wait until it reaches £90,000 to register. Choosing to register voluntarily below the threshold can make sense where a business wants to reclaim input VAT or wants to appear VAT-registered to business customers, although it also means charging VAT on sales from that point, which can be a disadvantage when selling mainly to consumers.
VAT deregistration threshold
HMRC also sets a separate, lower deregistration threshold, currently £88,000. If a VAT-registered business expects its taxable turnover for the next 12 months to fall below £88,000, it may be able to apply to deregister. Having separate registration and deregistration thresholds avoids businesses having to register and deregister repeatedly when turnover hovers close to a single figure.
Late VAT registration
Registering late does not remove the obligation to account for VAT from the date registration should have taken effect. HMRC can require the VAT that should have been charged during the late period to be paid, and can also charge a penalty. This is one of the main reasons ongoing turnover monitoring matters more than a single annual check.
VAT threshold example
Suppose a business had £82,000 of taxable turnover across the January to December period of one year, then £6,000 in January of the following year and a further £5,000 in February. Looking only at last year's accounts, the founder might conclude £82,000 is below the £90,000 threshold and assume no registration is needed.
But the rolling 12-month test does not work that way. Taking the 12 months to the end of February, turnover would be £82,000 plus £6,000 plus £5,000, which is £93,000, taking the business over the £90,000 threshold. The founder should not simply say our last accounts showed £82,000 turnover, so we're below the threshold. The VAT test requires the business to monitor the appropriate taxable-turnover period continuously, checking the trailing 12 months at the end of every month rather than relying on a single annual figure.
Related terms: VAT, VAT Registration, Taxable Turnover, VAT Return.
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.