Avoiding VAT surprises: what to watch out for as you grow

Growth is good. Unexpected VAT obligations are not. The UK VAT registration threshold is currently £90,000 of taxable turnover on a rolling 12‑month basis, and you must register within 30 days of crossing it. Falling back below £88,000 may allow you to deregister. Both figures were updated from April 2024 and remain in effect today.

The three VAT triggers that catch businesses out

1. Rolling 12‑month turnover
Registration looks at any rolling 12‑month period, not the financial year. If you pass £90,000 on any day, you must register within 30 days. Your effective date of registration is usually the first day of the second month after you cross the line.

2. Expecting to exceed in the next 30 days
If you sign a contract that will take you over the threshold in the next 30 days, you must register immediately. The effective date becomes the date you realised this would happen.

3. Different thresholds for schemes and deregistration
You can optionally deregister if your taxable turnover falls below £88,000. Some VAT schemes have their own limits, for example, Flat Rate and Annual Accounting.

What happens after registration

• You must charge VAT, keep digital records, and file VAT Returns using compatible software under Making Tax Digital.
• HMRC can visit to review your records. Good record keeping and documented processes reduce risk and make visits straightforward.

Common pitfalls as you scale

• No monthly turnover check. Put an automated 12‑month rolling total in your accounting software and review it monthly.
• Misunderstanding what counts. Taxable turnover includes standard, reduced and zero‑rated sales, plus certain reverse charge values. Exempt income does not count.
• Weak controls. HMRC’s VAT compliance guidance expects a clear audit trail, version control for spreadsheets, and automated checks where possible.

Quick checks for the next quarter

• Review your rolling turnover and projected sales.
• Confirm your software is MTD‑compatible and digitally linked.
• Document how you apply VAT rates and handle credit notes, then test the process with a sample.