VAT registration is mandatory when your "taxable turnover" — the value of VAT-applicable goods and services you've supplied in any rolling 12-month period — exceeds £90,000. Missing this threshold can result in penalties and having to pay HMRC the VAT you should have been charging (from your own pocket if you didn't add it to your prices).
The Rolling 12-Month Test
The £90,000 threshold isn't based on your tax year or calendar year — it's a rolling 12-month look-back. At the end of each month, you should check whether your total taxable supplies in the preceding 12 months exceed £90,000.
If you've exceeded the threshold, you must register for VAT within 30 days and start charging VAT from the "effective date of registration" (the first day of the month after the threshold is exceeded, or an agreed earlier date).
Should You Register Voluntarily Below £90,000?
Voluntary registration makes sense if:
- Your customers are largely VAT-registered businesses (who can reclaim the VAT you charge)
- You have significant VAT on your inputs (supplies to you) that you can reclaim
- You want to appear larger/more established to business clients
It does NOT make sense if your customers are mostly individuals (consumers who cannot reclaim VAT) and your input VAT is minimal.
Making Tax Digital for VAT
All VAT-registered businesses (above and below the threshold) must comply with Making Tax Digital for VAT. This means keeping digital records and submitting VAT returns through compatible software. From 2026, HMRC's compliance checks have intensified.
Frequently Asked Questions
What happens if I go over the threshold and didn't notice?
HMRC can assess VAT liability going back to when you should have registered. You must pay the VAT element of all your supplies since the missed registration date — even if you didn't add VAT to your prices. Penalties of 30–100% of unpaid VAT can apply if HMRC considers it deliberate avoidance.
Is the VAT threshold likely to change?
The threshold has been £90,000 since April 2024. The government announced it would be reviewed as part of the 2024 Autumn Budget but made no change. UK businesses have consistently called for an increase, given the UK's threshold is lower than many EU countries.
Calculate your VAT with our VAT Calculator.