The UK VAT threshold — what changes, when it changes, and the tests HMRC actually applies.
The £90,000 line is straightforward. Everything around it — the rolling test, the 30-day forward test, the £88,000 deregistration threshold, the zero threshold for non-established sellers — is where founders get caught. This is the explanation we give clients before they file VAT1.
The UK compulsory VAT registration threshold is £90,000 of VAT-taxable turnover measured over any rolling 12-month period. It has held at that level since 1 April 2024 and remains unchanged in 2026. Two tests apply: a backward-looking rolling test at the end of every month, and a forward-looking 30-day test whenever a new contract, order or launch is likely to push a single 30-day window past £90,000. The deregistration threshold is £88,000. For non-established taxable persons — overseas companies without a UK establishment — the threshold is zero, and the first taxable UK sale triggers registration. The difference between a painless VAT registration and an HMRC penalty is entirely about which test caught you and whether you monitored it monthly.
- £90,000 rolling 12-month VAT-taxable turnover triggers compulsory registration.
- A 30-day forward-looking test can trigger registration before the rolling test does.
- The deregistration threshold is £88,000 — the £2,000 gap is deliberate.
- Zero-rated sales count toward the threshold; exempt and out-of-scope sales do not.
- Non-established taxable persons (NETPs) have a zero threshold from the first UK sale.
- Late registration attracts a Failure to Notify penalty of 5% to 100% of the VAT due.
How the threshold has moved since 1973
The UK VAT registration threshold is one of the highest in the OECD — most European jurisdictions register businesses from annual turnover as low as €10,000 to €35,000. Its modern trajectory is a useful anchor when planning around future changes: uplifts happen in multi-year cycles, not annually, and long freezes are common.
| Year | Threshold | Context |
|---|---|---|
| 1991 | £35,000 | Introduction of the modern threshold structure. |
| 2001 | £54,000 | Gradual index-linked uplifts through the 1990s. |
| 2011 | £73,000 | Post-financial-crisis freeze relaxed in 2011. |
| 2017 | £85,000 | Frozen at £85,000 for seven consecutive years. |
| 2024 | £90,000 | First uplift since 2017 — took effect 1 April 2024. |
| 2026 | £90,000 | Unchanged in the 2025 Budget and 2026 Spring Statement. |
Figures compiled from Finance Act announcements and HMRC published notices; verify current position at gov.uk before acting.
The rolling 12-month test explained
At the end of every calendar month, add up VAT-taxable turnover for the twelve calendar months ending on that date. Not the tax year. Not the calendar year. Not your accounting year. Twelve rolling months, recalculated monthly. The moment that rolling total exceeds £90,000, you have 30 days to notify HMRC of your obligation to register. Registration takes effect from the first day of the second month after the threshold was crossed.
A worked timing example. Rolling turnover to 31 May 2026 is £88,500. Sales in June are £3,400. Rolling turnover to 30 June is £91,900 — the threshold is crossed in June. The 30-day notification window runs to 30 July. Registration is effective from 1 August. You must charge VAT on every taxable supply from 1 August. Between 1 July and 1 August you are still trading unregistered — the crossing month is not itself a VAT period.
Practical drill: at the same date each month, run a 12-month rolling sales report in your bookkeeping software and log the number. Start preparing at £75,000. Apply for registration at £85,000. Cross the threshold at £90,000 already inside the MTD infrastructure.
The 30-day forward-looking test
The rolling test is not the only trigger. A separate, forward-looking test requires you to register immediately whenever there are reasonable grounds to believe that your taxable turnover in the next 30 days alone will exceed £90,000. Registration is effective from the date you formed that expectation — not from a later month.
In practice this test bites when a small business wins a large one-off contract, launches a product with pre-orders that clear threshold in a single month, or acquires a customer base whose expected revenue will breach the limit in the first month of trading. It also bites for seasonal businesses: a retailer whose December sales alone are expected to exceed £90,000 must register from the date the forecast crystallises, regardless of an under-threshold rolling total.
HMRC will accept a genuine, evidenced forecast that later proves optimistic — provided you can show the contracts, purchase orders or reasoned commercial evidence you relied on. What is not accepted is retrospective explanation after an enquiry: the reasoning must be documented at the time.
What counts toward the threshold — and what does not
Misclassified turnover is the single most common trigger for a VAT enquiry in year two. The distinction is worth memorising.
- ·Standard-rated sales (20%)
- ·Reduced-rated sales (5%)
- ·Zero-rated sales (0%) — food, children's clothing, books, exports of goods
- ·Distance selling of goods into the UK from overseas (for NETPs)
- ·VAT-exempt supplies — most financial services, insurance, education, healthcare
- ·Sales outside the scope of UK VAT — most B2B services to overseas customers
- ·One-off sales of capital assets (equipment, vehicles, machinery)
- ·Grants, donations, insurance recoveries
- ·Dividends and interest income
- ·The VAT itself, if you are already registered
The £88,000 deregistration threshold
The gap between the registration threshold (£90,000) and the deregistration threshold (£88,000) is deliberate. It stops businesses ping-ponging in and out of registration each time they nudge the line. To deregister voluntarily you must satisfy HMRC that your expected VAT-taxable turnover in the next 12 months will not exceed £88,000 — a forward-looking declaration, evidenced by pipeline, contracts and recent trading history.
Deregistration triggers a deemed self-supply of any assets on which VAT was previously reclaimed and which remain on hand at the effective date. If the total VAT on those assets is above £1,000 you owe that VAT to HMRC on your final return. Stock, laptops, vehicles, unamortised software licences and unsold inventory all count. Time deregistration around low-inventory months to minimise the self-supply charge.
Do not deregister as a temporary reaction to a slow quarter. The compliance and reputational cost of re-registering later usually exceeds the VAT saved. Deregistration is for genuine structural change — a shift to exempt or out-of-scope work, a scaling down of trade — not for tactical margin recovery.
What happens if you register late
The Failure to Notify penalty regime is percentage-based on the VAT that should have been paid between the effective date of registration and the date HMRC was actually notified. Categories are non-deliberate (0% to 30%), deliberate but not concealed (20% to 70%), and deliberate and concealed (30% to 100%). Unprompted disclosure — where you tell HMRC before it tells you — attracts the lowest end of the range. Prompted disclosure, after HMRC has opened enquiries, attracts higher percentages.
You also owe the missed output VAT itself, which cannot be recovered retrospectively from customers who have already paid. A typical late-registration position — a service business that crossed the threshold four months before noticing — sits at £6,000 to £9,000 of back VAT plus a 5–15% penalty and default interest. Every month of delay compounds the loss.
The one mitigation available is pre-registration input VAT. Once the correct effective date is in place, the four-year (goods) and six-month (services) input tax rules apply, so a portion of the missed output VAT is offset by newly recoverable input tax. Model both figures before submitting a voluntary disclosure.
The zero threshold for overseas sellers
A non-established taxable person is a business that makes taxable supplies in the UK without having any business establishment in the UK. The £90,000 threshold does not apply to NETPs. From the first pound of taxable UK supply, VAT registration is compulsory. HMRC has expanded compliance action in this area every year since 2021, particularly for overseas sellers using UK marketplaces (Amazon, eBay, Etsy).
A UK Limited Company owned by a non-resident director is still a UK-established business — the company itself has a UK registered office and is a UK legal person. The £90,000 threshold applies to the company as normal. This is one of the practical reasons non-resident founders incorporate a UK company rather than sell into the UK directly through their overseas entity. Our guide on forming a UK company as a non-resident covers the wider structural picture.
How to monitor your position monthly
Every well-run small business has a monthly VAT threshold check baked into the month-end close. The mechanics are simple; the discipline is what founders miss. Three steps produce a reliable check: run a 12-month rolling sales report from your bookkeeping software; strip out any exempt or out-of-scope revenue; record the resulting figure in a persistent spreadsheet dated to that month-end.
At £75,000 you shortlist software for MTD compliance and draft VAT-compliant invoice templates. At £80,000 you brief your accountant and prepare the VAT1 application. At £85,000 you submit VAT1 with a chosen effective date that captures your largest planned capital purchase inside the pre-registration input tax windows. At £90,000 you are already inside the compliance perimeter — the crossing itself is administrative, not existential.
Founders who monitor monthly rarely miss the threshold. Founders who monitor quarterly usually miss it by one month. Founders who monitor annually miss it by four months and inherit a penalty.
Register your company for UK VAT
Fixed-fee UK VAT registration at £144. VAT1, MTD software setup and effective-date optimisation.
UK VAT Registration →Approaching the threshold or already over it? A 20-minute call gives you a straight answer on timing and effective date.
Book an advisor call →The UK VAT threshold — advisor answers
What is the UK VAT registration threshold in 2026?+
The compulsory UK VAT registration threshold is £90,000 of VAT-taxable turnover in any rolling 12-month period. It was raised from £85,000 on 1 April 2024 and has remained at £90,000 in the 2025 and 2026 Budgets. The deregistration threshold is £88,000. A second forward-looking test applies: you must register immediately if you expect taxable turnover to exceed £90,000 in the next 30 days alone.
Is the £90,000 threshold based on the tax year or calendar year?+
Neither. It is a rolling 12-month test. At the end of every month you look back 12 calendar months and add up VAT-taxable turnover. The moment that rolling total crosses £90,000, you have 30 days to notify HMRC. Registration takes effect from the first day of the second month after the threshold was crossed. Founders who only check their turnover annually often register weeks or months late — which is a penalty position.
What counts as taxable turnover for the VAT threshold?+
VAT-taxable turnover is the total value of everything you sell that is not exempt from VAT. It includes standard-rated (20%), reduced-rated (5%) and zero-rated (0%) sales. It excludes VAT-exempt supplies, sales outside the scope of UK VAT (most B2B services to overseas customers), one-off disposals of capital assets, grants, donations, dividends and insurance recoveries. Getting this classification right on your first invoice matters more than most founders realise.
What is the 30-day forward test?+
You must register for VAT immediately — not wait for the rolling test — if there are reasonable grounds to believe your VAT-taxable turnover will exceed £90,000 in the next 30 days by itself. This most commonly triggers when a new contract, a large one-off order, or a launch will push a single 30-day period past the threshold. Registration is effective from the date you formed that expectation, and HMRC expects you to notify within 30 days of that date.
What happens if I register for VAT late?+
HMRC issues a Failure to Notify penalty calculated as a percentage of the VAT that should have been paid between the effective date of registration and the date you actually notified HMRC. The percentage ranges from 5% for unprompted disclosure within 12 months to 100% for deliberate concealment discovered by HMRC. You also owe the missed output VAT itself. In practice, a founder who registers three months late on a business at threshold typically owes several thousand pounds in back VAT plus a penalty of 5–15%.
When can I deregister for VAT?+
You can deregister voluntarily once you can satisfy HMRC that your VAT-taxable turnover in the next 12 months will not exceed £88,000. Compulsory deregistration applies if you cease making taxable supplies. On deregistration you owe VAT on stock and assets held with a total VAT value above £1,000 (the deemed self-supply). Time the exit around inventory levels and unfinished capital projects — poorly timed deregistration destroys margin the same way poorly timed registration does.
Does the threshold apply per company or per person?+
Per taxable person. A limited company is a separate taxable person from its director, so a founder's personal freelance income and their company's turnover are counted separately. However, HMRC's business splitting anti-avoidance rules apply where a single business is artificially divided across multiple entities to keep each below the threshold — same customers, same premises, same equipment, same directors. HMRC can direct that the entities be treated as a single taxable person from a date it specifies.
Does the threshold apply to non-resident companies selling in the UK?+
Non-established taxable persons (NETPs) — businesses without a UK establishment — have no registration threshold. If a non-UK company makes any taxable supply in the UK, it must register from the first pound of sales. UK-incorporated companies with non-resident directors are still UK-established and benefit from the £90,000 threshold. This is one of the most misunderstood parts of the VAT regime and one of the most common triggers for HMRC compliance action against overseas sellers using UK marketplaces.
Does the threshold include VAT charged to customers?+
No — the £90,000 threshold is measured on the net VAT-exclusive value of your taxable supplies. If you already charge VAT (because you are voluntarily registered) you exclude the VAT element when measuring against the threshold. This matters when a business considers deregistering: the deregistration test is also VAT-exclusive.
Will the VAT threshold change in 2026 or 2027?+
The threshold has been £90,000 since 1 April 2024 and remained unchanged in the 2025 Autumn Budget and the 2026 Spring Statement. No index-linking mechanism applies — the threshold is set by the Chancellor and requires a Budget announcement to change. Historically, thresholds move at multi-year intervals rather than annually. Plan on the current £90,000 figure until HMRC publishes a change notice.
How do I monitor my rolling 12-month turnover?+
The most reliable approach is a monthly close: on the same date each month, run a rolling 12-month sales report in your bookkeeping software (Xero, QuickBooks, FreeAgent) and record the number in a simple spreadsheet. When the number reaches £75,000 you start preparing (software, invoice templates, VAT number application) so that registration on the day you cross £90,000 is administratively painless. Waiting until the rolling number is already above threshold is a compliance risk we see repeatedly.
Do you offer a UK VAT registration service?+
Yes. We register companies for UK VAT for a fixed fee of £144, including MTD software setup guidance and effective-date optimisation. We are not authorised to provide tax advice — for tailored guidance on whether and when to register, we work alongside our clients' accountants or introduce a specialist where needed.
This article is general guidance based on UK VAT legislation and HMRC published notices current at July 2026. It is not a substitute for tailored tax advice. Rates, thresholds and rules change; verify against HMRC guidance before acting. UK Company Experts is a trading name of Seven Oak Prestige Ltd.
Related guides from our editorial library.
Browse all insights
