The Current VAT Threshold: £90,000 (2025/26)
As it stands, the threshold for mandatory VAT registration in the UK is £90,000 in taxable turnover over any rolling 12-month period.
…Or if you realise taxable turnover in the next 30 days is going to exceed the £90,000 threshold. This is rare and based on securing large orders/contracts that will breach the limits in a single 30-day period. So let us focus on the rolling 12 months that will impact the majority of businesses.
- Taxable turnover means your total sales — not profit. If you invoice £91,000 this year, even if your expenses leave you with only £10,000 in profit, you’re still over the threshold. Taxable turnover specifically excludes goods and services that are either VAT exempt or out of scope for VAT.
- Rolling 12 months means it’s not based on your calendar year, your tax year, or your financial year. It’s a constantly updating period — the most recent 12 months from today. So each month, you need to review the past year’s sales and see if you’ve crossed that threshold.
That’s where many businesses slip up. They assume “Oh, I’ve not hit £90K this tax year,” and then HMRC catches them months later with backdated VAT payments, late registration fines, and even interest charges.
Why the Threshold Could Change (Again)
There are ongoing discussions in government and policy circles about adjusting the VAT registration threshold. Some propose increasing it to £100,000 to reduce red tape for microbusinesses. Others argue for a drop to £30,000, to bring more businesses into the tax system and level the playing field.
While no official change has been confirmed at the time of writing, you should always plan with flexibility. The smartest business owners stay VAT-ready even before they’re legally required to register.
Voluntary VAT Registration: Should You Register Early?
Now, here’s where things get interesting.
Just because you’re under the £90K threshold doesn’t mean you can’t register for VAT. In fact, voluntary registration can be a smart strategic move — particularly if:
- You work with other VAT-registered businesses who can reclaim the VAT you charge
- You invest in VAT-heavy expenses like software, travel, or outsourced contractors
- You want to appear more established to new clients or partners.
- You are making sales of zero or reduced VAT, which could mean you benefit from VAT refunds.
Red Flag: Ignoring the Threshold
Here’s the real risk: if you hit the £90,000 threshold and don’t act within 30 days, HMRC won’t just let it slide. They’ll treat it as if you should have been charging VAT already — which means you’ll owe VAT on all the sales you made after the threshold was passed.
Imagine sending invoices for £91,000, then getting told months later that you need to hand over 20% of that (£15,166.67) — but you never charged it to your clients. That can hit your cashflow hard.
That’s why it’s essential to monitor your turnover regularly and work with a proactive accountant who understands VAT strategy — not just tax returns.
Understanding VAT is vital, as even if you go over the £90,000 threshold temporarily, this needs to be addressed with HMRC seeking a registration exception.
The Bottom Line
If you’re approaching the VAT threshold, or even if you’re miles away but want to operate smart, the best time to start thinking about VAT is now.
Get your bookkeeping in order. Know your turnover. And if you’re not sure whether you’re close to the edge, talk to someone who can help.
Learn how to track your VAT threshold, what a rolling 12-month turnover really looks like, and how to spot the signs before HMRC does.
