What's the VAT threshold in the UK for 2026?

£90,000 of taxable turnover on a rolling 12-month basis. You must register within 30 days of the end of the month you cross the threshold. The deregistration threshold sits at £88,000.

Is the VAT threshold based on the tax year?

No. It's a rolling 12-month test. Every month, add up your taxable turnover for the previous 12 months. If it's over £90,000 you must register. Missing this is the single most common way businesses end up with a backdated registration.

Does zero-rated turnover count towards the VAT threshold?

Yes. Standard-rated, reduced-rated and zero-rated sales all count. Only exempt sales (financial services, insurance, most property, education, health) and sales outside the scope of UK VAT are excluded.

Should I register for VAT voluntarily?

It usually pays off if your customers are mostly VAT-registered businesses (they can reclaim it) and you have significant input VAT to recover. It rarely pays off if your customers are consumers or small unregistered businesses, because you'll effectively become 20% more expensive overnight.

When do I need to register for VAT? UK thresholds and rules for 2026

VAT is one of those taxes that catches business owners out because the threshold is measured on a rolling 12-month basis, not by tax year or calendar year. Miss the point where you cross it and HMRC backdates the registration, which almost always costs you money.

Here are the rules for 2025/26 and how to think about the decision.

The short version

You must register for VAT when either:

Your taxable turnover in the last rolling 12 months goes over £90,000, or
You expect your taxable turnover to exceed £90,000 in the next 30 days alone (for example, a single large contract).

You can also register voluntarily below the threshold if it suits you.

The deregistration threshold sits at £88,000.

What counts as taxable turnover

Not all income counts. Include:

Standard-rated sales (20%).
Reduced-rated sales (5%, mostly domestic energy).
Zero-rated sales (0%, e.g. most food, children's clothes, exports).

Exclude:

Exempt sales (financial services, insurance, some property, education, health).
Sales outside the scope of UK VAT (services to overseas business customers under B2B rules).
Capital asset disposals (selling a vehicle, machinery, etc.).

Zero-rated is easy to miss. A business selling almost entirely zero-rated goods (food producer, children's clothing brand) still counts that turnover towards the £90k and can still be forced to register.

The rolling 12-month test

Every month, check your taxable turnover for the previous 12 months. Not the tax year, not the calendar year, not your accounting year. Rolling.

Example: on 31 October 2026, add up taxable sales from 1 November 2025 through 31 October 2026. If it's over £90,000, you have crossed the threshold.

You then have 30 days from the end of the month you crossed to notify HMRC. Registration takes effect from the first day of the month after that 30-day window.

The "next 30 days alone" test

If at any point you become aware that a single stretch of 30 days will take you over £90,000 on its own (e.g. a big one-off contract), you must register immediately. Registration takes effect from the day you knew.

This test catches consultants and agencies who land one big engagement that dwarfs the rest of their year.

What happens if you register late

HMRC backdates the registration to the date you should have registered. You then owe VAT on every taxable sale since that date, whether or not you charged it. That means:

You have to pay HMRC the VAT on those sales.
You can try to recover it from customers by issuing VAT-only invoices, but they may refuse if the contract was VAT-inclusive.
Penalties apply for late notification, on a sliding scale up to 15% of the tax owed depending on how late you are.

It is genuinely painful. Track the rolling test monthly.

Voluntary registration: when it makes sense

You can register below £90,000 if you choose. It's worth doing when:

Your customers are mostly VAT-registered businesses. They reclaim the VAT you charge, so it doesn't cost them anything, and you get to reclaim VAT on your own costs.
You have significant input VAT to recover. Big equipment purchases, high overheads, or a lot of professional fees.
You want to look established. For some markets, being VAT-registered signals scale. Enterprise buyers sometimes filter suppliers by it.

It's usually not worth voluntary registration when:

Your customers are consumers or unregistered small businesses. Adding 20% to your prices makes you 20% more expensive overnight.
Your margin is thin. VAT admin plus quarterly returns adds real cost.

What changes once you're VAT-registered

Charge VAT on all taxable sales at the correct rate.
File a VAT return every quarter (or monthly if you're often in a repayment position).
Comply with Making Tax Digital for VAT from day one: digital records, MTD-compatible software, and digital submission.
Reclaim input VAT on business purchases.
Watch cash flow. You collect VAT throughout the quarter and pay it to HMRC one calendar month and 7 days after the quarter end. It is not your money. Keep it separate.

VAT schemes worth knowing

Three schemes that can save time or cash flow:

Flat Rate Scheme: you charge normal VAT but pay HMRC a flat percentage of turnover, keeping the difference. Simpler admin. Available if VAT-exclusive turnover is under £150,000.
Cash Accounting Scheme: pay VAT when customers pay you, not when you invoice. Good for businesses with slow-paying customers. Available under £1.35m turnover.
Annual Accounting Scheme: one return a year, with monthly or quarterly payments on account. Available under £1.35m turnover.

Not all of them stack, and the Flat Rate Scheme has "limited cost trader" rules that catch consultancies. Take advice before opting in.

Rough test: should I register now?

Rolling 12-month taxable turnover over £90,000? You must register.
Rolling turnover between £75,000 and £90,000 and growing? Start planning; you'll likely cross within 6 months.
Below £75,000, customers mostly VAT-registered businesses, and you have real input VAT? Voluntary registration probably pays.
Below £75,000, customers are consumers or small unregistered businesses? Stay out.

Getting help

Registering for VAT is straightforward. Choosing the right scheme, setting up MTD-compatible software, and getting cash flow right is where it gets fiddly. Our bookkeeping and VAT service handles the lot. Or get in touch for a call.