VAT registration isn't optional once you cross a certain point, but the rules for exactly when catch a lot of small business owners out. Here's how the threshold actually works.
At a glance
- The registration threshold is £90,000 of taxable turnover.
- It's a rolling 12-month test, not your accounting or tax year, checked every month.
- You must also register if you expect to cross £90,000 in the next 30 days alone.
- Voluntary registration below the threshold can make sense: it depends on who your customers are.
The threshold
The current VAT registration threshold is £90,000 of taxable turnover. You must register if either:
- Your total taxable turnover for the previous 12 months (on a rolling basis, not the tax or calendar year) goes over £90,000, or
- You expect your taxable turnover to go over £90,000 in the next 30 days alone.
The rolling 12-month test trips people up most often. It isn't based on your accounting year: it's checked every month, looking back at the previous 12 months. A strong month can push you over the threshold even if your annual turnover looks comfortably under it.
What happens once you're over
You have 30 days from the end of the month you went over the threshold to register. Miss this and you may still owe VAT from when you should have registered, plus a possible penalty, even if you didn't realise you'd crossed the line.
Voluntary registration
You can register for VAT even if you're well under the threshold. This can make sense if you mostly sell to VAT-registered businesses (so they can reclaim the VAT you charge) or if you want to reclaim VAT on significant business costs. It's less likely to make sense if most of your customers are members of the public who can't reclaim VAT themselves, since your prices effectively rise by the VAT rate.
This article is general information, not personal tax advice, and the threshold can change at future Budgets. Get in touch if you'd like help working out whether you need to register, or whether voluntary registration makes sense for your business.