The VAT threshold in 2026: when you must register for VAT

The photographer who measured the wrong 12 months

Take Nadia, a wedding photographer in York, as an example. In the spring her accounts for the year to 31 March 2026 showed sales of £81,000, and she filed that figure away as comfortably under the VAT threshold. She has never added VAT to a booking.

The VAT threshold does not look at accounts years or tax years. It looks back over the last 12 months at the end of every month. At the end of September 2026, after the best summer of her career, Nadia's last 12 months came to £90,500. That is over the £90,000 VAT threshold for 2026, so she has until 30 October 2026 to register, and she is VAT registered from 1 November 2026 whether or not she has applied by then.

Nothing went wrong in her business. She simply measured the wrong 12 months. Here is how the test works, what counts towards it, and what to do on either side of the line.

The VAT threshold for 2026: £90,000 (and what it was in 2025)

The VAT registration threshold has been £90,000 since 1 April 2024, when it rose from £85,000. The deregistration threshold rose from £83,000 to £88,000 on the same day. HMRC's VAT Notice 700/1 supplement, last updated on 5 August 2026, gives £90,000 and £88,000 as the current figures, and the law itself, Schedule 1 of the VAT Act 1994, shows no pending change. Those are the figures in force from 1 April 2026 and on 9 October 2026.

The VAT threshold in 2025 was also £90,000, throughout the year. Anyone reading an older guide that says £85,000 is reading the figure that applied from 1 April 2017 to 31 March 2024.

What is the current VAT threshold for small businesses? There is no separate small business threshold: £90,000 applies to every UK business. The other numbers you may see belong to VAT accounting schemes, which you can only use once registered. You can join the Flat Rate Scheme with taxable turnover of £150,000 or less and must leave above £230,000; cash accounting and annual accounting can be joined at £1.35 million or less and must be left above £1.6 million.

VAT thresholds run from 1 April to 31 March, not by tax year. Source: HMRC VAT Notice 700/1 supplement; legislation.gov.uk, VAT Act 1994 Schedule 1.

When do I need to register for VAT? The two tests

The threshold to register for VAT is tested two ways, and you must register if either is met.

Looking back. At the end of any month, add up your taxable turnover for the previous 12 months, or since you started if that is less. If it is over £90,000, you must register for VAT within 30 days of the end of that month, and your effective date of registration is the first day of the second month after you went over. HMRC's own example: over on 15 July, register by 30 August, registered from 1 September.

Looking forward. At any time, if you expect your taxable turnover in the next 30 days alone to go over £90,000, you must register by the end of those 30 days, and you are registered from the date you realised, not the date the sales arrive.

Here is Nadia's year, month by month. Her accounts year ended at £81,000, but the rolling total kept climbing.

The rolling total adds the new month and drops the same month a year earlier (April 2025 was £7,000, May £9,000, and so on).

At the end of August she was £500 under. One extra booking that month would have moved every date a month earlier. At the end of September she is over, so she must register by 30 October 2026 and is registered from 1 November 2026. From then on every booking is either priced plus VAT, or the VAT comes out of her price.

The forward test catches the single large contract. Take a freelance software consultant who has never been near the threshold and, on 12 October 2026, agrees a fixed-price project worth £96,000, all delivered and invoiced by 6 November. On 12 October he expects more than £90,000 in the next 30 days alone, so he must register by 10 November 2026, and his effective date is 12 October. If the contract says "plus VAT", he invoices £96,000 plus £19,200 once he has his VAT number, and a VAT-registered client reclaims the £19,200. If the contract is silent and the client will not pay more, the £96,000 is treated as including VAT: £16,000 of it is VAT, and he keeps £80,000.

Over the line for a month or two: exception from registration

If you went over in the last 12 months but can show that the next 12 months will not go over £88,000, you can apply for an exception from registration, using form VAT1 with form VAT5EXC, which you request from HMRC by phone. HMRC replies within 40 working days, and if it refuses, it registers you from the date you were liable. This is different from exemption from registration, which is for businesses whose sales are all or mostly zero-rated.

Two cases work differently. A business based outside the UK that supplies goods or services to the UK must register whatever its turnover: there is no threshold. And if you take over a business as a going concern, it is the combined taxable turnover of that business and your existing one that is tested.

What is taxable turnover in the UK?

Taxable turnover is the total value of everything you sell that is not exempt from VAT or outside its scope. You count your sales at the value you charged: if you are not registered, there is no VAT on top to strip out. It includes:

• standard-rated, reduced-rated and zero-rated sales;
• goods you hire or loan to customers;
• business goods used for personal reasons;
• goods you barter, part-exchange or give as gifts;
• services you received from businesses in other countries that you had to reverse charge;
• goods and services under the domestic reverse charge;
• building work over £100,000 that your business did for itself.

The reverse charge line is the one that surprises freelancers: services bought from overseas businesses, such as some advertising or software, can count towards your own taxable turnover.

You leave out sales of capital assets such as equipment or vehicles, exempt sales such as insurance or certain lettings of land and buildings, and income outside the scope of VAT. Zero-rated sales still count, so a business selling only zero-rated goods can be over the threshold and then ask for exemption from registration. A business making only exempt sales cannot register at all.

Your effective date of registration, and what registering late costs

Whenever you tell HMRC, it registers you from the date you were liable, and you must account for VAT from that date even if you did not charge it to your customers. You can offset input tax on costs you hold VAT invoices for. Because you did not add VAT, the price you were paid is treated as already including it, so at 20% the VAT due is one sixth of what you were paid.

Suppose Nadia misses her deadline and only realises in August 2027. Her sales from 1 November 2026 to 31 July 2027 follow the same pattern as the year before: £61,000, none with VAT added. The VAT due is £61,000 divided by 6, which is £10,166.67. If she holds VAT invoices for £1,400 of VAT on her costs, she owes £8,766.67.

On top of that sits the penalty for failing to notify, which applies to any registration obligation arising on or after 1 April 2010. It is a percentage of the "potential lost revenue", roughly the VAT that should have been paid, and depends on how the failure happened and whether you told HMRC before it found out. If you have a reasonable excuse for a non-deliberate failure, there is no penalty.

Source: HMRC factsheet CC/FS11, penalties for failure to notify.

If Nadia tells HMRC herself within 12 months, her penalty could be anything from nothing to about £2,630 on that £8,766.67. The 5%, 10% and 15% late registration rates still quoted online belong to the old regime for obligations before 1 April 2010. The lesson is that the VAT is owed either way; the penalty is the part you control.

How to register for VAT

You can usually register for VAT online on GOV.UK. For a limited company you need the company registration number, the business bank details, the Unique Taxpayer Reference (UTR), details of annual turnover and an estimate of taxable turnover for the next 12 months, plus information from the company's Self Assessment, Corporation Tax and PAYE records. For an individual or partnership you need your National Insurance number, an identity document such as a passport or driving licence, your bank details, your UTR if you have one, your annual turnover and an estimate for the next 12 months, plus information such as your Self Assessment return, payslips or P60. A paper form VAT1 is only for listed cases, including an application for exception.

HMRC asks you to wait 40 working days before chasing. You then receive a 9-digit VAT registration number, which must go on every invoice, confirmation of your effective date of registration, and details of your first return. HMRC signs you up to Making Tax Digital for VAT unless you are exempt, and you should set up your VAT online account as soon as the number arrives.

While you wait, you cannot show VAT on an invoice, but you can increase your prices to cover the VAT you will owe, then send proper VAT invoices within 30 days of getting your number. HMRC's own example is a £100,000 contract invoiced at £120,000 and reissued as a VAT invoice once the number comes through. If you are asking for money before you supply anything, a pro forma invoice keeps the VAT tied to the payment.

Registering for VAT as a sole trader

The sole trader VAT threshold is the same £90,000 that applies to a limited company. VAT registers the person, not the trading name: HMRC's manual treats the sole proprietor as the "person", registered in their own name with any trading styles added. So two trades run by the same sole trader count together towards one £90,000, while a limited company is a separate person with its own threshold. HMRC can direct that businesses artificially split to stay under the threshold be treated as one.

You register as an individual with the details listed above. VAT is a separate system from Making Tax Digital for Income Tax, which turns on income, not taxable turnover; our guide to Making Tax Digital for Income Tax as a sole trader covers that side.

Is it worth a small business being VAT registered?

You can register voluntarily below £90,000, as long as you are in business. You choose the date, can ask for it to be backdated by up to 4 years, and cannot change it afterwards. Once registered you can reclaim VAT on goods bought up to 4 years before your registration date that you still have, and on services bought up to 6 months before, on your first return.

Whether it pays depends on who your customers are. Compare two traders, each with £60,000 of sales:

The developer recovers the VAT on her costs and her clients lose nothing. The hairdresser either raises her prices by a fifth or gives up about a seventh of her takings. The Flat Rate Scheme softens this a little: she would pay a fixed percentage of her VAT-inclusive turnover, 13% for hairdressing, which is £7,800, with 1% off in her first year of registration. But a "limited cost business", one whose spending on goods is under 2% of turnover or under £1,000 a year, pays 16.5%, and the scheme gives no VAT back on purchases except certain capital assets over £2,000.

Both traders take on quarterly VAT returns. Before deciding, HMRC's free VAT Registration Estimator lets you test your own figures; it takes about 20 minutes and HMRC does not record what you enter.

The VAT deregistration threshold: £88,000

You can ask HMRC to cancel your registration if you can show that your taxable turnover in the next 12 months will not exceed £88,000, counted without VAT. It is a forward-looking test, so HMRC wants a reason the coming year will be lower, such as reduced hours or lost contracts. It will not agree if the drop is because you intend to stop trading or pause taxable sales for 30 days or more in the next 12 months, and you cannot cancel from a past date: keep charging VAT until HMRC confirms. The details are in VAT Notice 700/11.

Your final return runs up to and including the cancellation date, you keep VAT records for 6 years, and HMRC re-registers you if you should not have cancelled. Stock and assets you claimed VAT on are treated as sold to yourself, valued at what you would pay for them now in their present condition. Nothing is due if that VAT comes to £1,000 or less, which at 20% means a gross value of £6,000 or less.

Take a management consultant who moves to three days a week and expects £70,000 of taxable turnover in the next 12 months. His laptop and office furniture are worth £5,400 including VAT, so the VAT is £900 and nothing is due on them. If he also kept a van worth £4,200, the total would be £9,600 gross, the VAT £1,600, and all £1,600 would go on his final return. If you stop trading altogether, cancelling is compulsory, within 30 days.

What changes once you are VAT registered

From your effective date you charge VAT at the right rate on taxable sales; our VAT calculator adds or removes it at 20%, 5% or 0%. Your VAT number goes on every invoice. Returns are usually every three months, due one calendar month and 7 days after the period ends, and a nil return is still required. Every VAT-registered business keeps digital records and files under Making Tax Digital for VAT, using VAT return software, and it pays to reconcile your VAT return to the ledger each quarter.

You will also start checking other businesses' VAT numbers. HMRC's free Check a UK VAT number service confirms whether a number is valid and shows the business it belongs to.

Keeping VAT right from your registration date in IQ Books

To be clear about the limit first: IQ Books does not watch the £90,000 registration threshold or alert you when you cross it, and registration itself happens on GOV.UK. What it does is make the month-end check quick and get everything right once you are registered.

• Check your rolling 12 months. The profit and loss report run by month, over any 12 months you choose, shows your sales month by month. Take out anything that is not taxable turnover and you have the test.
• Your registration date is part of the books. Settings hold your VAT scheme and the effective date from your VAT certificate. Nothing dated before it can carry VAT, and an organisation that is not registered cannot put VAT on anything.
• Pre-registration VAT. The VAT return screen takes a schedule of goods (up to 4 years, still on hand) and services (up to 6 months) and posts it on your registration date, so the reclaim lands on your first return.
• Your VAT number prints on your invoices once it is in Settings.
• Returns filed under Making Tax Digital, free. Standard, cash accounting and Flat Rate Scheme returns are computed from the ledger and filed to HMRC on every plan, including the free one, without using credits.
• Leaving. Set the scheme to not registered with your deregistration date and the final return can still be produced.

For MTD for VAT, HMRC approved IQ Books for live filing in September 2026; it is not yet on HMRC's separate list of VAT software. IQ Books is UK only and does not give tax advice: for your own position, check GOV.UK or ask an accountant.