VAT Threshold 2026/27: When to Register (and Deregister) for VAT

What Is the VAT Threshold for 2026/27?

The UK VAT registration threshold is £90,000 of VAT-taxable turnover, and the deregistration threshold is £88,000. You must register if your taxable turnover in any rolling 12-month period goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. You can apply to deregister if you expect your taxable turnover in the next 12 months to be £88,000 or less.

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. If your business is VAT-registered, you charge VAT on your sales (output tax) and can reclaim VAT on your business purchases (input tax). The difference between what you charge and what you reclaim is paid to — or refunded by — HMRC. Once your taxable turnover exceeds the registration threshold, registration is compulsory. Businesses below the threshold can choose to register voluntarily, and doing so can offer real financial advantages.

The Compulsory Registration Threshold: Two Tests

For 2026/27 the VAT registration threshold is £90,000. There are two tests, and you must register if either is met:

• The rolling 12-month (backward-looking) test: at the end of any month, your taxable turnover for the previous 12 months is more than £90,000.
• The 30-day (forward-looking) test: you expect your taxable turnover in the next 30 days alone to be more than £90,000 — for example because you have won a large contract. In this case you must register by the end of that 30-day period, and registration takes effect from the start of it.

The backward-looking test is a rolling 12-month test — not based on your financial year — so you need to monitor your turnover on an ongoing basis.

It is important to note that the threshold applies to taxable turnover, which includes standard-rated, reduced-rated, and zero-rated sales. It does not include exempt supplies or income from outside the scope of VAT (such as salaries, dividends, or interest income). If you are unsure whether your income counts as taxable, it is worth seeking professional advice to avoid an unexpected registration requirement.

If you exceed the threshold and fail to register on time, HMRC can backdate your registration and charge you the VAT you should have been collecting. This means you may need to pay VAT out of your own pocket if you cannot recover it from your customers retrospectively. Late registration can also attract penalties.

What Counts as VAT-Taxable Turnover?

Your VAT-taxable turnover includes the total value of everything you sell that is not VAT-exempt. This means standard-rated sales (20%), reduced-rate sales (5%), and zero-rated sales (0%) all count towards the threshold. Only VAT-exempt supplies (such as insurance, financial services, and certain health and education services) are excluded. Importantly, it is your gross income that counts, not your profit. A freelancer earning £95,000 but spending £40,000 on expenses still has a VAT-taxable turnover of £95,000 and must register.

The 12-month test is rolling — it is not based on your tax year or accounting year. At the end of every month, you should check whether your total taxable turnover in the preceding 12 months has exceeded £90,000.

How to Register for VAT

VAT registration is done online through your HMRC Government Gateway account. You will need to provide your business details, an estimate of your expected turnover, your bank account details, and information about your business activities. The process typically takes a few weeks, after which HMRC will issue your VAT registration certificate with your VAT number and the date from which your registration is effective.

If you need to register because you have exceeded the threshold, you must do so within 30 days of the end of the month in which you exceeded it. Your registration will then be backdated to the first day of the second month after you crossed the threshold. For example, if your rolling 12-month turnover exceeded £90,000 at the end of March 2026, you must notify HMRC by 30 April 2026, and your registration will be effective from 1 May 2026.

Deregistering for VAT

If you are VAT-registered and your taxable turnover falls, you can apply to deregister once you expect your VAT-taxable turnover in the next 12 months to be £88,000 or less — the deregistration threshold. Deregistration is voluntary in this situation. You must deregister if you stop making taxable supplies altogether, for example because you close or sell the business, usually within 30 days.

You apply through your HMRC online VAT account or on form VAT7. Before you do, weigh up the effect:

• You stop charging VAT, which can make you cheaper for consumer customers — useful for businesses selling mainly to the public.
• You can no longer reclaim input VAT on purchases, which matters if you have significant VAT-bearing costs or sell mainly to VAT-registered businesses.
• You may owe VAT on stock and assets you still hold at the date of deregistration, if you reclaimed VAT when you bought them and the VAT due would be more than £1,000.
• You must submit a final VAT return covering the period up to your deregistration date.
• If your turnover is close to the threshold, you may soon need to register again — and changing prices and invoices twice is disruptive.

If you are thinking about deregistering, our VAT team can model whether it saves you money before you apply.

Voluntary Registration: Why Register Early?

Many businesses assume they should wait until they hit the threshold before registering. In practice, voluntary registration can be a smart move for several reasons:

• Reclaim VAT on expenses: If your business incurs significant costs that include VAT — such as equipment, materials, software subscriptions, or professional services — registering allows you to reclaim that input VAT. For businesses with high start-up costs, this can provide a meaningful cash flow boost.
• Professional credibility: A VAT registration number signals to potential clients and suppliers that your business has reached a certain level of activity. This can be particularly important when tendering for contracts or working with larger businesses that expect their suppliers to be VAT-registered.
• Avoid a sudden price increase: If you wait until you cross the threshold, you will suddenly need to add 20% to your prices (or absorb the cost yourself). Registering early allows you to build VAT into your pricing from the start, avoiding an abrupt adjustment that could unsettle your customers.
• Pre-registration claims: When you register, you can reclaim VAT on goods purchased up to four years before registration (provided they are still in use) and services purchased up to six months before registration. This can result in a useful refund on your first VAT return.

When Voluntary Registration Might Not Be Suitable

Voluntary registration is not always the right choice. If most of your customers are consumers (not VAT-registered businesses), adding 20% VAT to your prices could make you less competitive, as your customers cannot reclaim the VAT. Similarly, if your business expenses are low and you have little input VAT to reclaim, the administrative burden of filing quarterly returns may outweigh the benefits. Businesses that deal primarily in VAT-exempt supplies — such as certain financial, educational, or healthcare services — may also find little advantage in registering.

VAT Schemes: Simplifying Your VAT

HMRC offers several VAT schemes designed to simplify administration or improve cash flow for smaller businesses:

• Flat Rate Scheme: Instead of calculating actual input and output VAT, you pay a fixed percentage of your gross turnover. The percentage depends on your industry. This scheme can save time and, in some cases, money — though since changes in 2017, it is less advantageous for "limited cost traders" (businesses with low material costs).
• Cash Accounting Scheme: You account for VAT based on when you receive and make payments, rather than when invoices are issued. This is helpful for businesses with long payment terms, as you do not have to pay VAT to HMRC before your customers have paid you.
• Annual Accounting Scheme: You submit one VAT return per year instead of four, making interim payments throughout the year based on your estimated liability. This reduces paperwork and makes budgeting easier.

Each scheme has eligibility criteria and limitations, so it is important to assess which one — if any — suits your business. Our VAT services team can help you determine the most suitable approach.

Making Tax Digital for VAT

All VAT-registered businesses are now required to keep digital records and submit VAT returns through Making Tax Digital (MTD) compatible software. This applies regardless of your turnover. You cannot submit VAT returns through the old HMRC portal. Popular MTD-compatible software includes Xero, QuickBooks, FreeAgent, and Sage. If you are not yet using cloud accounting software, registering for VAT is a good time to make the switch — our cloud accounting services can help you get set up.

Common Questions

Q: Do I need to register if I only sell zero-rated goods?
A: Yes, zero-rated sales still count towards the £90,000 threshold. However, if all your sales are zero-rated, you will typically receive VAT refunds (since you charge 0% output VAT but can reclaim input VAT on your purchases), so registration is usually beneficial.

Q: I sell on eBay/Etsy/Amazon — do I need to register?
A: If your total taxable sales across all platforms and channels exceed £90,000 in a rolling 12-month period, yes. Online marketplace sales are no different from any other sales for VAT purposes.

Q: What if I have multiple businesses?
A: If you are a sole trader running multiple businesses, your combined turnover from all businesses counts towards the threshold. If each business is a separate limited company, each company is assessed independently.

Key Takeaways

• You must register for VAT when your taxable turnover exceeds £90,000 in a rolling 12-month period, or is expected to exceed £90,000 in the next 30 days alone.
• You can deregister if you expect taxable turnover in the next 12 months to be £88,000 or less — but you lose the ability to reclaim input VAT.
• Use our VAT calculator to see how adding VAT affects your prices.
• Voluntary registration can help you reclaim VAT on expenses, enhance credibility, and avoid sudden price jumps.
• Consider the nature of your customer base — B2B businesses benefit more from registration than B2C businesses.
• Explore VAT schemes like the Flat Rate Scheme or Cash Accounting to simplify compliance and improve cash flow.
• All VAT returns must be filed digitally under Making Tax Digital rules.
• Seek professional advice if you are unsure whether and when to register. Our VAT specialists are here to help.