By Callum Ollerenshaw, Director, ACCA — Traction Accountancy
VAT registration stops being optional the moment your turnover crosses a fixed line, and from that point HMRC expects action within a set number of days, not whenever it becomes convenient. This guide covers exactly what the VAT registration threshold is, how the two tests HMRC applies work, when registration is compulsory, whether voluntary VAT registration is worth considering below the threshold, and the practical steps to register.
What is the VAT registration threshold?
The VAT registration threshold is £90,000. Once your VAT taxable turnover, meaning the total value of everything you sell that is not VAT exempt or “outside the scope”, passes £90,000 in a rolling 12 month period, VAT registration becomes compulsory. This is not the same as your accounting year or your tax year. It is a continuously moving 12 month window that has to be checked every single month, not just once a year when your accounts are prepared.
The deregistration threshold, the point at which a VAT registered business can apply to leave the VAT system, is currently £88,000. The gap between the two thresholds exists so a business hovering right around the line is not forced to register and deregister repeatedly.
The future turnover test
There is a second way VAT registration can be triggered, and it catches out more businesses than the rolling 12 month calculation above. If at any point you expect your turnover to exceed £90,000 in the next 30 days alone, you must register immediately, regardless of what your turnover has been up to that point. A business that lands one large contract, or has a sudden spike in orders, can trigger this test on day one of trading, long before any 12 month history exists. It is the test most commonly missed, since it depends entirely on a reasonable expectation of what is about to happen, not on anything that has already been recorded in your accounts.
When you are required to register for VAT
The deadline depends on which test applies to you.
- Under the historic turnover test, you have 30 days from the end of the month in which you crossed the threshold to notify HMRC. Your effective date of registration is the first day of the second month after you crossed it. For example, if your rolling 12 month turnover passes £90,000 at any point during May, you have until 30 June to notify HMRC (30 days from the end of May, the month you crossed the threshold). Your effective date of registration would then be 1 July.
- Under the future turnover test, you must notify HMRC by the end of the 30 day period during which you expect to exceed the threshold. Your effective date of registration is the date you formed that expectation, not the date you actually register. For example, if on 10 June you sign a new contract and realise it will take your turnover over £90,000 within the next 30 days, you must notify HMRC by 9 July, the end of that 30 day window. But your effective date of registration is 10 June, the day you first had reasonable grounds to expect it, not 9 July when you actually notify HMRC. That gap matters because you are treated as VAT registered, and liable to charge VAT, from 10 June onwards, even if you only get round to telling HMRC weeks later.
Missing either deadline means HMRC can charge a failure to notify penalty, calculated on the VAT that should have been charged and collected from the date registration should have happened, whether or not you actually charged your customers VAT during that period.
Should you register for VAT voluntarily?
You do not have to wait until you hit the threshold. Voluntary VAT registration is available to any business, and for some it makes genuine commercial sense well before it becomes compulsory.
Voluntary VAT registration is usually worth considering if most of your customers are VAT registered businesses themselves, since they can reclaim the VAT you charge and the cost is effectively neutral to them, or if you have significant VAT on setup costs, equipment, or stock that you want to reclaim. It can also add a degree of credibility with larger clients who expect to be dealing with a VAT registered supplier.
It is usually worth avoiding voluntary registration if most of your customers are members of the public or non VAT registered businesses, since adding VAT to your prices makes you less competitive without any offsetting benefit to them, and it also adds a genuine administrative burden, quarterly returns, Making Tax Digital compliant software, and more detailed record keeping, that a very small business may not be ready to take on.
Voluntary VAT registration is a commercial decision as much as a tax one, so it's worth getting advice before deciding.
How to register for VAT
- Confirm which test applies to you, and calculate your effective date of registration accordingly, or confirm you are registering voluntarily.
- Gather your business details. This includes your Unique Taxpayer Reference, company registration number if you are a limited company, bank account details, an estimate of your turnover, and details of what your business actually sells.
- Register online through your Government Gateway account at gov.uk, or have an accountant register on your behalf as your appointed agent.
- HMRC will issue a VAT registration certificate confirming your VAT number and your effective date of registration, the date from which you must start charging VAT.
- Set up Making Tax Digital compliant software, since all VAT registered businesses are required to keep digital records and file returns through compatible software rather than manually.
Reclaiming VAT on purchases made before you registered
A detail many businesses miss entirely is that VAT registration does not just apply going forward. You can also backdate a claim for VAT you paid before your effective date of registration, on both goods and services, provided you meet the specific time limits and conditions HMRC sets for each.
- For goods, meaning equipment, stock, and other assets, you can reclaim VAT on purchases made in the four years before your registration date, as long as you still owned or held those goods at the point you registered. Goods you had already sold or used up before registering do not qualify.
- For services, you can reclaim VAT on purchases made in the six months before your registration date, provided those services were supplied to you for the purposes of the business you are now registering.
This is worth checking properly rather than assuming it does not apply to you, particularly if you spent on equipment, stock, professional fees, or setup costs in the run up to registering. It is a genuine, HMRC recognised claim, not a grey area, but it only works if you have kept the original VAT invoices, since HMRC will expect to see proper evidence for anything reclaimed this way.
FAQs
What is the current VAT registration threshold in the UK?
£90,000 of VAT taxable turnover in any rolling 12 month period, or an expectation of exceeding £90,000 in the next 30 days alone.
Do I check the VAT threshold at my company year end?
No. It must be checked on a rolling 12 month basis every month, not annually. This is the single most common reason businesses register late.
Can I register for VAT before I reach the threshold?
Yes. Voluntary VAT registration is available at any turnover level, but this is a commercial decision as much as a financial one, so it is worth seeking advice on this before deciding.
What happens if I register for VAT late?
HMRC can charge a failure to notify penalty based on the VAT that should have been charged from your correct effective date of registration, regardless of whether you actually collected it from customers during that period.
Can I claim back VAT from before I was registered?
Yes. You can reclaim VAT on goods you still hold going back up to four years before your registration date, and on services going back up to six months, provided you kept the original VAT invoices as evidence.
Figures correct for the 2026/27 tax year. This article is general guidance, not personalised tax advice.