- Taxable turnover
- the total value of everything a business sells that is not VAT exempt, which is what gets tested against the threshold.
- VAT registration threshold
- £90,000 of taxable turnover in any rolling 12-month period, above which registration with HMRC is compulsory.
- Rolling 12-month period
- the most recent 12 months measured at the end of every calendar month, not the tax year and not the accounting year.
- Forward-look test
- the rule that you must also register if you expect to exceed £90,000 in the next 30 days on its own, for example after signing a large contract.
- Effective date of registration
- the date you must start charging VAT, which is the first day of the second month after the month you crossed the threshold.
- Deregistration threshold
- £88,000, below which a business can apply to cancel its VAT registration.
Key facts
- VAT registration threshold for 2026/27 is £90,000 of taxable turnover in any rolling 12-month period
- Deregistration threshold is £88,000 if turnover falls below that level
- You must also register if you expect to exceed £90,000 in the next 30 days alone
- Effective registration date is the first day of the second month after you crossed the threshold
Registration is only the start. Once registered you charge VAT at the right rate and can reclaim VAT on purchases, which we cover in the VAT rates guide guide and the broader VAT guide for small businesses.
VAT sits alongside your other business taxes, so if you trade through a company see how the profit is taxed at corporation tax rates guide.
The VAT Rates: Which Applies to Your Sales
| VAT Rate | Rate | Examples |
|---|---|---|
| Standard rate | 20% | Most goods and services |
| Reduced rate | 5% | Domestic energy, children's car seats, certain home improvements |
| Zero rate | 0% | Most food, books, children's clothing, public transport |
| Exempt | N/A | Medical services, insurance, financial services, education |
If your business sells only zero-rated goods (for example, a bookshop or food retailer), registering for VAT can actually result in a net VAT refund because you reclaim VAT on your purchases without charging any to customers. This is one of the main reasons for voluntary registration below the threshold.
Mandatory vs Voluntary Registration
Mandatory registration: Required when taxable turnover exceeds £90,000 over any rolling 12-month period, or when you expect to exceed the threshold within the next 30 days. You must register within 30 days of exceeding the threshold and start charging VAT from the registration date.
Voluntary registration: You can register below the threshold at any time. Reasons to do so:
- You sell primarily to VAT-registered businesses (they can reclaim the VAT you charge, so it is cost-neutral for them and you get to reclaim input VAT on your purchases)
- Your business has high input VAT costs relative to sales (reclaiming becomes valuable)
- You want to appear larger and more established to business clients
Voluntary deregistration is possible if your taxable turnover falls below the deregistration threshold (£88,000 for 2026/27).
Expert Tip
If you are a freelancer or sole trader selling services predominantly to other businesses (for example, a web developer, graphic designer, or marketing consultant), voluntary VAT registration is often beneficial even below £90,000. Your business clients can reclaim the 20% VAT you charge, so they are unaffected. Meanwhile, you reclaim VAT on your own business costs (software subscriptions, equipment, subcontractors). Run the numbers carefully before deciding.What Happens to Your Prices When You Register
This is where many small business owners make costly mistakes. When you become VAT registered:
If your customers are other businesses (B2B): They can claim back the VAT, so your prices effectively stay the same for them. You simply become a VAT collection agent for HMRC.
If your customers are consumers (B2C): VAT-inclusive pricing often means either absorbing the VAT yourself (reducing your margin) or passing it on (increasing your prices by 20%), which can reduce demand.
Pre-registration: charges £200 per job, all net revenue to the business.
Post-registration: must now charge £240 (£200 plus 20% VAT) or reduce the job fee to £166.67 to keep the customer's total at £200.
If the plumber works primarily for domestic customers who cannot reclaim VAT, they face a genuine pricing decision. Absorbing the VAT on existing jobs reduces the £200 fee to £166.67 net (they remit £33.33 to HMRC). Charging £240 may lose some customers.
UK VAT Calculator
Add or remove VAT from any amount instantly at 20%, 5%, or a custom rate. Shows the net amount, VAT component, and gross total.
The VAT Flat Rate Scheme
The Flat Rate Scheme (FRS) is available to businesses with taxable turnover under £150,000 per year. Instead of calculating the difference between VAT collected and VAT paid, you pay HMRC a fixed percentage of your gross (VAT-inclusive) turnover. The flat rate varies by business sector.
| Business Type | Flat Rate Percentage |
|---|---|
| Accountancy or bookkeeping | 14.5% |
| Computer and IT consultancy | 14.5% |
| Catering services (including restaurants) | 12.5% |
| Building and construction services | 9.5% |
| Retail of food, confectionery, newspapers | 4% |
| Legal services | 14.5% |
| General hairdressing or other beauty treatment services | 13% |
How FRS works: If you charge £12,000 (inclusive of 20% VAT) in a quarter, you collected £2,000 in VAT. Under FRS for IT consultancy at 14.5%, you pay HMRC 14.5% of £12,000 = £1,740. You keep the £260 difference. The saving exists because HMRC's flat rate is less than the actual VAT rate on your sales, accounting for the expectation that you have some input VAT costs.
However: under FRS you cannot reclaim input VAT on purchases (except for certain capital goods). If your business has high purchase costs with significant input VAT, the standard VAT scheme may be more beneficial.
How to Register for VAT
Registration is entirely online through HMRC's VAT Registration Service at gov.uk/vat-registration. You will need:
- Your business details (name, address, Companies House number if limited company)
- National Insurance number or UTR (for sole traders and partnerships)
- Bank account details (for repayment claims)
- Your expected annual taxable turnover
- Details of the business activities
HMRC typically processes VAT registrations within 10 to 14 working days and issues a VAT registration certificate with your VAT number. You can start charging VAT once your effective registration date is confirmed (this will be the date you crossed the threshold or applied, whichever is appropriate).
Cash Accounting vs Standard VAT Accounting
| Method | VAT Paid to HMRC Based On | Best For |
|---|---|---|
| Standard (invoice) accounting | When invoices are issued, not when paid | Businesses with prompt-paying customers |
| Cash accounting | When cash is actually received | Businesses with slow-paying customers or significant bad debts |
Cash accounting is available to businesses with expected taxable turnover under £1.35 million. The main advantage: you do not pay VAT to HMRC until your customer has paid you. If a customer fails to pay, you never remit VAT on that invoice.
Related Calculators
Frequently Asked Questions
£90,000 in taxable turnover over any rolling 12-month period. This threshold has been frozen since April 2017 and remains at £90,000 for 2026/27.
Taxable turnover includes all your sales at the standard rate (20%), reduced rate (5%), and zero rate (0%). Exempt sales and out-of-scope income are not counted toward the threshold.
HMRC will assess you for the VAT you should have charged from the date you became liable to register, plus a late registration penalty. Interest may also apply. Penalties range from 5% to 15% of unpaid VAT depending on how late the registration is.
In certain circumstances, yes. You can reclaim VAT on goods purchased in the four years before registration and services purchased in the six months before registration, provided the goods or services are still being used in the business at the time of registration.
It is a rolling 12-month test, checked at the end of every calendar month, not the tax year or your accounting year. If your taxable turnover for the previous 12 months passes £90,000 at any month end, you must register.
As well as the backward-looking 12-month test, you must register if you expect your taxable turnover to exceed £90,000 in the next 30 days alone, for example after winning a large contract. Registration is then required from the date you formed that expectation.
Your effective date of registration is the first day of the second month after you crossed the threshold. For example, if your rolling 12-month turnover passed £90,000 by the end of August 2026, you must tell HMRC by 30 September 2026 and start charging VAT from 1 October 2026.
Possibly. If a one-off event pushed you over £90,000 but you can show your turnover will stay below the £88,000 deregistration threshold over the next 12 months, you can apply to HMRC for an exception from registration using forms VAT1 and VAT5EXC. It is not automatic and the burden of proof is on you.
Get UK finance tips delivered weekly
No spam. Unsubscribe any time.
You Might Also Like
VAT Explained: A Complete Guide for UK Small Businesses 2026
Everything UK small businesses need to know about VAT: registration threshold, rates, adding and removing VAT, and the flat rate scheme.
UK VAT Rates 2026/27: Standard, Reduced, and Zero-Rated Items Guide
UK VAT rates 2026/27: standard 20 percent, reduced 5 percent, zero 0 percent. Full tables plus the £90,000 registration threshold and exempt versus zero-rated.
James Hartley is a Chartered Management Accountant (CIMA) with more than eight years of experience in UK tax, payroll and compliance. He holds a BSc in Finance and Economics from the University of Manchester and spent his early career at a Big 4 accounting firm. He founded WhatsUK to build free UK financial calculators and guides verified against official HMRC sources. He authors every calculator and article on WhatsUK.
Sources & Official References
- GOV.UK: VAT registration- Official HMRC VAT registration guidance
- HMRC: VAT Flat Rate Scheme- Eligibility and sector flat rates
- HMRC: VAT thresholds- £90,000 threshold for 2026/27
Last verified:
Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.