Do I Need to Register for VAT? The GBP 90k Threshold
Quick answer
You must register for VAT if your VAT-taxable turnover went over GBP 90,000 in any rolling 12-month period, or if you expect to pass GBP 90,000 in the next 30 days alone. The threshold is a registration trigger, not a tax-free band: once registered you charge VAT on all your taxable sales.
VAT registration: the key facts
| Threshold or test | What it means |
|---|---|
| Registration threshold | GBP 90,000 of VAT-taxable turnover. Cross it and you must register |
| Deregistration threshold | GBP 88,000. You can cancel your registration if turnover falls below this |
| Rolling 12-month test (backward) | You must register if turnover went over GBP 90,000 in any 12-month period, checked every month, not the tax year or calendar year |
| Next-30-days test (forward) | You must register if you expect turnover to pass GBP 90,000 in the next 30 days on its own, for example from one large order |
| Is the first GBP 90,000 VAT free? | No. The threshold decides whether you register, not whether tax is due. Once registered you charge VAT on all taxable sales, not just the part over GBP 90,000 |
| Deadline to register (backward test) | Within 30 days of the end of the month you went over the threshold |
| Deadline to register (forward test) | By the end of the 30-day period you expect to go over |
| Temporary exceeding | You can apply for a registration "exception" if you can show turnover will stay below GBP 88,000 over the next 12 months |
| Voluntary registration | You can register below GBP 90,000, which lets you reclaim VAT on purchases |
| How to register | Online through your HMRC account, or by post using form VAT1 |
Step by step
- 1
Add up your rolling 12-month turnover
Total your VAT-taxable turnover for the last 12 months. Do this at the end of every month, because the 12-month window keeps moving. This is not your tax-year or calendar-year total.
- 2
Check the forward test too
Separately, ask whether you expect to pass GBP 90,000 in the next 30 days alone, for example from a single large contract. If so, you must register even if your past 12 months were under the threshold.
- 3
Register on time
If you went over on the backward test, register within 30 days of the end of the month you crossed it. If it is the forward test, register by the end of that 30-day period.
- 4
Register online with HMRC
Register through your HMRC online account, or by post using form VAT1. HMRC issues your VAT number, after which you charge VAT on taxable sales and can reclaim VAT on purchases.
The number everyone repeats is GBP 90,000, but the way it works trips people up. The threshold is a registration trigger, not a tax-free allowance. There is no "first GBP 90,000 is VAT free" band. Below the line you do not charge VAT because you are not registered; cross it and you must register, and from then on you charge VAT on all your taxable sales. The table above is the detail at a glance.
The mechanic that catches people is the two tests. The backward test looks at any rolling 12 months, checked at the end of every month, not the tax year or the calendar year. The forward test looks ahead: if you expect to pass GBP 90,000 in the next 30 days on its own, you must register straight away. Below the line, voluntary registration can still pay off if you sell mostly to VAT-registered businesses, because you can reclaim VAT on your own costs. Sell to consumers and registration makes you up to 20% more expensive overnight. And because the threshold has been held flat rather than rising with inflation, more small traders are pulled over the line each year through price rises alone.
If you are just starting out, see going self-employed for the wider setup and how to register as a sole trader for the HMRC basics. Once you are registered, the VAT Flat Rate Scheme can simplify how much you pay.
Figures are taken from gov.uk and were current at the date above; VAT rules and thresholds can change. This is general information, not financial or tax advice.
Frequently asked questions
Is the first GBP 90,000 VAT free?
No. GBP 90,000 is the point at which you must register for VAT, not a tax-free band. Once you are registered you charge VAT on all your taxable sales, not only on turnover above GBP 90,000. Before you register you do not charge VAT at all, but that is because you are not registered, not because the first GBP 90,000 is exempt.
What is the VAT threshold for a small business?
The same as for any business. You must register once your VAT-taxable turnover goes over GBP 90,000 in any rolling 12-month period, or when you expect to pass GBP 90,000 in the next 30 days. There is no separate small-business threshold.
Is it worth becoming VAT registered voluntarily?
It depends who your customers are. If they are mostly VAT-registered businesses, registering lets you reclaim VAT on your own purchases while they reclaim the VAT you charge, so the cost to them is broadly neutral. If your customers are consumers who cannot reclaim it, registering makes you up to 20% more expensive overnight.
How do I avoid hitting the VAT threshold?
The threshold is GBP 90,000 of taxable turnover over any rolling 12 months, so the only genuine way to stay under it is to keep turnover below that line. The threshold has been held at GBP 90,000 rather than rising with inflation, so more traders cross it each year through price rises alone. If you go over only temporarily you can apply for an exception.
Can I cancel my VAT registration?
Yes. You can apply to cancel (deregister) if your VAT-taxable turnover falls below the deregistration threshold of GBP 88,000 and you expect it to stay there. You must cancel if you stop making taxable sales or close the business.
Sources
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General information, not financial advice. Tax rules and figures can change; check the current position on gov.uk before acting.