VAT Registration Threshold: When Do You Need to Register?

For businesses based in the UK, VAT registration is normally required if taxable turnover goes over £90,000 in a rolling 12-month period, or if you expect it to exceed £90,000 in the next 30 days alone. Different rules apply to businesses based outside the UK, which may need to register regardless of turnover.

Lowdown

The current UK VAT registration threshold is £90,000. The test uses taxable turnover, not profit. It generally includes sales subject to standard, reduced and zero-rate VAT, but excludes exempt sales. Special rules can apply to some other transactions.^[1]

If most of your taxable sales are zero-rated, you may be able to apply to HMRC for an exemption from registration.

Why It Matters

If you exceed the threshold based on the previous 12 months, you must normally register within 30 days of the end of the month in which you exceeded it. Your VAT registration normally starts on the first day of the second month after that.^[2]

A different rule applies if you expect taxable turnover to exceed £90,000 in the next 30 days alone. You must register by the end of that 30-day period, and your VAT registration starts from the date you first realised you would exceed the threshold.^[2]

From your effective registration date, you must account for VAT, keep the required records and submit VAT returns. Making Tax Digital for VAT generally applies unless an exemption is granted. You may also be able to reclaim VAT on eligible business purchases.^[3]

Late registration can mean paying VAT from the date you should have registered and may lead to a penalty. You can also register voluntarily below the threshold.^[1]

If you are already registered and expect taxable turnover to fall below £88,000 over the next 12 months, you can normally ask HMRC to cancel your registration. If you temporarily exceed £90,000, HMRC may grant an exception from registration where you can demonstrate that taxable supplies will not exceed £88,000 over the following 12 months. You must apply for that exception.^[4]

Our Conclusion

Monitor taxable turnover regularly. The £90,000 test is rolling, so do not wait until the end of your accounting year to check it.

Sources

[1] HMRC, Register for VAT — When to register

[2] HMRC VAT Registration Manual, Effective Date of Registration — calculating the EDR

[3] HMRC, How to register for VAT and Reclaim VAT on business expenses

[4] HMRC, Cancel your VAT registration and Apply for an exception from registering for VAT