VAT registration threshold UK 2025 | Figures Chartered Accountants

If you run a business in the UK, understanding the VAT registration threshold is essential. Get it wrong and you could face backdated VAT bills, penalties, and interest from HMRC. The VAT registration threshold for 2025/26 is £90,000 of taxable turnover in a rolling 12-month period. Once you hit that figure, you must register. This guide explains exactly how the threshold works, what counts towards it, and what to do when you reach it.

We cover the current threshold, how to calculate your taxable turnover, what happens if you go over, and why some businesses register voluntarily even when they are below the limit. This is for UK business owners, founders, and directors who want to get VAT registration right.

What is the VAT registration threshold?

The VAT registration threshold is the level of taxable turnover at which a business must register for VAT with HMRC. For the 2025/26 tax year, the threshold is £90,000. This was increased from £85,000 in April 2024.

You must register if your taxable turnover in any rolling 12-month period exceeds £90,000, or if you expect it to exceed £90,000 in the next 30 days alone. This is not based on your accounting year or the tax year; HMRC looks at any consecutive 12-month period.

Taxable turnover includes the total value of everything you sell that is not exempt from VAT. It includes zero-rated sales (e.g. most food, children's clothing) as well as standard-rated and reduced-rate supplies. It does not include VAT-exempt income (e.g. certain financial or insurance services) or income from outside the UK in most cases.

How to check if you have reached the threshold

At the end of each month, look back over the previous 12 months of taxable turnover. If the total exceeds £90,000, you must register. You have 30 days from the end of the month in which you exceeded the threshold to notify HMRC. Your VAT registration will then take effect from the first day of the second month after you exceeded the threshold.

Example: Your taxable turnover for the 12 months ending 31 March 2025 is £92,000. You must notify HMRC by 30 April 2025. Your VAT registration date will be 1 May 2025.

If at any point you expect your taxable turnover to exceed £90,000 in the next 30 days alone (e.g. you win a large contract), you must register immediately. The effective date is the beginning of that 30-day period.

What counts towards taxable turnover

Not everything you earn counts. Here is a breakdown:

Included:

Sales of goods and services at the standard rate (20%)
Sales at the reduced rate (5%)
Zero-rated sales (0% but still taxable)
Sales of business assets if they would normally be taxable

Excluded:

VAT-exempt supplies (e.g. insurance, certain financial services, education)
Sales made outside the UK (in most cases)
Income that is not from a business activity (e.g. employment income, dividends)
Sales of capital assets in some circumstances

If you are unsure whether a particular income stream counts, your accountant can advise. The distinction between zero-rated and exempt is important: zero-rated sales count towards the threshold even though no VAT is charged. For more detail, see HMRC's guidance on VAT registration.

What happens when you register

Once registered, you must:

Charge VAT on your taxable sales at the appropriate rate
Submit VAT returns to HMRC (usually quarterly)
Keep digital records under Making Tax Digital rules
Pay any VAT you owe by the deadline (usually one month and seven days after the end of each quarter)

You will also be able to reclaim VAT on business purchases (input VAT), which can offset what you owe. For many businesses, especially those with significant costs, this is a real benefit. Our VAT service handles registration, returns, and ongoing compliance.

Choosing a VAT scheme

When you register, you can choose from several VAT schemes:

Standard accounting: You charge VAT on sales and reclaim VAT on purchases. You account for VAT when you invoice, regardless of when you get paid.
Cash accounting: You account for VAT when you actually receive or make payment. Useful if you have slow-paying customers.
Flat rate scheme: You pay a fixed percentage of your gross turnover to HMRC and do not reclaim input VAT (with limited exceptions). This simplifies record-keeping but is not always the cheapest option.
Annual accounting: You submit one VAT return per year instead of four, with interim payments based on an estimate.

Your accountant can help you decide which scheme works best for your business. For more on the flat rate scheme, see our post on the VAT flat rate scheme explained.

Voluntary registration

You do not have to wait until you hit £90,000. Any business making taxable supplies can register voluntarily at any time. There are good reasons to do so:

Reclaim input VAT. If you buy goods or services with VAT on them, you can reclaim that VAT once registered. This is especially useful if you have high startup costs or buy from VAT-registered suppliers.
Credibility. Some larger businesses prefer to deal with VAT-registered suppliers. Having a VAT number can make your business look more established.
Avoid a backdated bill. If you are close to the threshold and expect to go over, registering early means you are in control of the timing.

The downside is that you must charge VAT on your sales, which increases your prices for customers who are not VAT-registered (e.g. consumers). If your customers are mostly other VAT-registered businesses, this is less of an issue because they reclaim the VAT.

What if you go over the threshold and do not register

If HMRC discovers that you should have registered but did not, they can:

Backdate your registration to the date you should have registered
Charge you the VAT you should have collected (you may struggle to recover this from customers retrospectively)
Issue a penalty for late notification (a percentage of the VAT owed, depending on how late you are)
Charge interest on late payments

The penalty for late registration depends on how much VAT is owed and how late the notification is. It can be significant. Keeping an eye on your rolling 12-month turnover each month is the best way to avoid this. Good bookkeeping makes monitoring straightforward.

The deregistration threshold

If your taxable turnover drops below the deregistration threshold (currently £88,000 for 2025/26), you can apply to deregister. This is optional; you can stay registered if you prefer. Deregistration can reduce admin if your turnover has genuinely fallen and is likely to stay below the threshold.

UK tax and legal accuracy

The VAT registration threshold of £90,000 applies from 1 April 2024. The deregistration threshold is £88,000. These figures are set by HMRC and can change at each Budget. The rules described here apply to UK businesses making taxable supplies. Different rules apply to businesses receiving services from abroad (reverse charge) and to distance selling. This article is for informational purposes only and does not constitute professional tax or financial advice. Please speak to a qualified accountant before taking action.

Frequently asked questions

Does the VAT threshold apply to my total income or just sales?

It applies to your taxable turnover, which is the total value of taxable sales you make. It does not include VAT-exempt income, non-business income, or most overseas sales. Zero-rated sales are included.

What happens if I go slightly over the threshold for one month?

You must still register. There is no grace period or buffer. If your rolling 12-month taxable turnover exceeds £90,000 at any month-end, you must notify HMRC within 30 days.

Can I deregister if my turnover drops?

Yes. If you expect your taxable turnover to fall below £88,000 in the next 12 months, you can apply to cancel your VAT registration. HMRC will review the application.

Is the threshold different for online businesses?

No. The same £90,000 threshold applies to all UK businesses regardless of how they sell. However, if you sell digital services to consumers in the EU, separate rules may apply.

Do I include sales from before I started trading?

No. Only taxable supplies made in the course of business count. Pre-trading income is not included, although pre-trading expenses may have VAT you can reclaim once registered.

Summary and next steps

The VAT registration threshold UK 2025 is £90,000 of taxable turnover in a rolling 12-month period. Monitor your turnover monthly, understand what counts, and register on time to avoid penalties. If you are close to the threshold or have questions about voluntary registration, we can help.

At Figures Chartered Accountants we handle VAT registration, scheme selection, and ongoing returns for UK businesses. Book a discovery call or see our VAT service to get started.