What is the VAT threshold? UK registration rules explained

The VAT threshold is the taxable turnover level at which you must register for value added tax (VAT) with HMRC. In the UK, that figure is currently £90,000 over any rolling 12-month period.

Once you cross it, you'll need to charge VAT on your sales and file quarterly returns. HMRC uses two separate tests to check whether you've hit the threshold, and either one is enough to require registration.

What is the VAT threshold?

The VAT threshold is the amount of taxable turnover that triggers compulsory VAT registration in the UK. Since April 2024, HMRC has set this figure at £90,000.

Once your turnover exceeds that amount within a rolling 12-month window, you're legally required to register, charge VAT on eligible sales, and submit returns through Making Tax Digital (MTD). HMRC measures the threshold against a continuous 12-month period that you check at the end of every month.

A separate figure applies if you want to leave the VAT register. The deregistration threshold sits at £88,000. If your taxable turnover falls below that level, you can apply to cancel your registration and stop charging VAT.

How the two VAT registration tests work

Either test on its own is enough to require registration.

The 12-month rolling test

At the end of every month, look back over the previous 12 months of taxable turnover. If the total exceeds £90,000, you've crossed the threshold.

This isn't tied to your financial year or the tax year. It's a continuous rolling window, which means a strong trading quarter at any point in the year can push you over.

Once you cross that line, you have 30 days from the end of that month to notify HMRC. Your registration then kicks in on the first day of the second month after the one where you went over. For example, if your 12-month total passes £90,000 at the end of June, you'd need to tell HMRC by July 30, and your registration would start on August 1.

The 30-day forward-looking test

If you expect your taxable turnover to exceed £90,000 within the next 30 days alone, you must register before the end of that 30-day window. The most common trigger is a single large contract or one-off project that pushes you past the threshold in one go.

Under this test, your registration takes effect from the date you knew the threshold would be breached, not from the end of the month. That means you need to start charging VAT on sales from that day forward.

What counts as taxable turnover?

Taxable turnover covers every sale your business makes that isn't classified as VAT-exempt.

That includes three rate categories:

• Standard-rated sales (20%): Most goods and services sold in the UK
• Reduced-rate sales (5%): Certain items like home energy and children's car seats
• Zero-rated sales (0%): Goods like most food, children's clothing, and exports

Zero-rated sales still count toward your threshold even though the VAT charged is 0%. Exempt sales, such as insurance, financial services, and certain types of education, don't count at all.

HMRC calculates taxable turnover from your total revenue, not your net profit. Tracking business expenses against revenue shows how close you are to the line.

Can you register for VAT below the threshold?

You don't have to wait until you hit £90,000. Any UK business can register for VAT voluntarily, even with turnover well below the threshold.

The main reason to do this is input VAT recovery. Once registered, you can reclaim the VAT you pay on business purchases, from office supplies and software subscriptions to professional services. If your business spends heavily on VAT-eligible costs, voluntary registration can reduce your effective expenses.

But you'll need to charge VAT on your sales, which either raises your prices for end customers or cuts into your margins if you absorb the cost. You'll also take on the administrative work of filing VAT returns and keeping compliant records.

For many early-stage businesses selling mainly to other VAT-registered companies, the input VAT savings outweigh the extra work. If most of your customers are individual consumers, the price increase may offset the reclaim.

You can also backdate a voluntary registration by up to 4 years. That lets you reclaim VAT on eligible purchases you've already made, as long as you still have the invoices.

VAT schemes and their thresholds

Once registered, you can choose from several HMRC-approved VAT schemes. Each has its own turnover limits for joining and leaving.

The Flat Rate Scheme suits smaller businesses that want to simplify their VAT admin. The fixed percentage rate varies by industry, and you generally can't reclaim input VAT on individual purchases, except for capital goods over £2,000.

Cash Accounting and Annual Accounting can be used together and work well for businesses with uneven cash flow, since you only owe VAT on money you've collected, not on invoices you've issued.

What happens when you cross the VAT threshold?

Exceeding £90,000 triggers registration deadlines and new filing requirements.

Registration deadlines and effective dates

Under the 12-month rolling test, you must notify HMRC within 30 days of the end of the month you exceeded the threshold. Your registration becomes effective on the first day of the second month after that. If those deadlines pass without notification, HMRC may backdate your registration to when it should have started, and you would owe the VAT that should have been charged in the interim.

Under the 30-day forward-looking test, you must register from the date you first expected to breach the threshold, with no buffer period.

Penalties for late registration

HMRC charges a penalty based on how late you are and the VAT you owe for the period between when you should have registered and when you did. The standard penalty bands are:

• Up to 9 months late: 5% of the VAT due
• 9–18 months late: 10% of the VAT due
• Over 18 months late: 15% of the VAT due

These penalties sit on top of the VAT itself, so late registration means paying both the tax owed and a surcharge.

What if you temporarily exceed the threshold?

If a one-off event pushes your turnover past £90,000 and you don't expect it to stay there, you can apply for an exception from registration. You'll need to show HMRC that your taxable turnover won't exceed the deregistration threshold of £88,000 in the next 12 months.

This exception isn't automatic. You still need to notify HMRC within the standard 30-day window and make the case for why your turnover spike was temporary. If HMRC agrees, you won't need to register, but if they don't, your registration goes ahead as normal.

How to register for VAT

The registration process runs through HMRC's online portal. You'll need your business details, bank account information, and an estimate of your expected VAT-taxable turnover for the next 12 months.

After you register, HMRC will issue a VAT registration certificate with your VAT number, usually within 40 working days. From your effective registration date, you must charge VAT on all taxable sales, keep records of VAT charged and paid, and file VAT returns on time. Your filing schedule depends on your scheme, either quarterly or annually.

If you use accounting software, check that it supports MTD for VAT. Since April 2022, all VAT-registered businesses must keep digital records and file returns through MTD-compatible software.

When can you deregister from VAT?

If your taxable turnover drops below £88,000, you can apply to cancel your VAT registration. You might also deregister if you stop making taxable supplies entirely, for instance if you close or sell the business.

Deregistration isn't instant. You need to apply through your HMRC online account, and HMRC will confirm the date your registration ends. Until that date, you're still required to charge VAT and file returns.

If you were voluntarily registered and your turnover is still above zero, leaving means you can no longer reclaim VAT on your business purchases. It's worth checking whether the input VAT you're recovering still justifies staying on the register.

Keep your VAT records clean with Ramp

Registering for VAT adds a layer of record-keeping to every transaction. Each sale needs the right VAT treatment, each receipt needs to be captured and coded, and your accounting software needs to reflect all of it accurately before you file.

Ramp automates that work for UK businesses:

• VAT coding on receipts and invoices is captured and suggested as transactions come in, so your team reviews and confirms rather than entering codes manually
• Receipt capture prompts employees at the point of spend, and policy enforcement flags missing documentation before it becomes a month-end problem
• Everything syncs to Xero, QuickBooks Online, or a supported ERP, keeping your books current without re-keying

The compliance obligations don’t change, but the manual effort behind them does.

See how Ramp works for UK businesses.