It’s £90,000 of taxable turnover in any rolling 12-month period, and it’s been at that level since 1 April 2024, holding steady through 2025/26 and into 2026/27. Once your taxable turnover crosses that line, VAT registration stops being optional and becomes a legal requirement, with a 30-day window to tell HMRC. This guide covers exactly how the threshold is measured, what counts toward it, and what happens if you register late.
What is the VAT threshold in 2026?
The UK VAT registration threshold for 2026/27 is £90,000. If your VAT-taxable turnover goes over that amount in any rolling 12-month period, you must register for VAT with HMRC, regardless of your business’s size, structure or how long it’s been trading.
This isn’t new for 2026. The threshold rose from £85,000 to £90,000 on 1 April 2024, and the government confirmed at the time that both this figure and the deregistration threshold would then be frozen, according to HMRC’s Spring Budget 2024 announcement. It’s held steady since, through the 2025/26 tax year and now into 2026/27, so if you’ve seen older articles quoting £85,000, that figure is out of date.
VAT threshold 2025 and VAT threshold 2026: same number, no change
If you’re searching for the 2025 figure specifically, the answer is identical: £90,000. The threshold hasn’t moved between 2024/25, 2025/26 and 2026/27, so whichever of those years brought you here, the number and the rules below apply equally. There’s no separate “2025 threshold” to track down; it’s the same £90,000 limit throughout.
VAT registration threshold UK: how it’s actually measured
This is where a lot of business owners get caught out, because the threshold doesn’t work the way most people assume.
The rolling 12-month test
HMRC doesn’t measure your turnover against your accounting year or the tax year running to 5 April. Instead, it uses a rolling 12-month test that moves forward every month. At the end of each calendar month, you need to add up your taxable turnover for the previous 12 months and check whether it’s gone over £90,000.
That means your VAT position can change month by month, even if your accounting year end is fixed. A business with an April to March accounting year could still cross the threshold in, say, October, based purely on the trailing 12 months to that point, not the position at their year end.
The forward-look test
There’s a second, less well-known test that catches out fast-growing businesses. If, at any point, you expect your taxable turnover for the next 30 days alone to exceed £90,000, you must register immediately, not wait for the rolling 12-month figure to catch up.
This typically applies when a business wins a single large contract or order that on its own will push turnover past £90,000 within a month. In that case, registration isn’t triggered by history; it’s triggered by a reasonable, forward-looking expectation.
When do I need to register for VAT?
Once you’ve crossed the threshold under either test, you have 30 days to notify HMRC, and the countdown starts from different points depending on which test applied.
- Rolling 12-month test: you have 30 days from the end of the month in which your turnover went over £90,000
- Forward-look test: you must register by the end of the 30-day period during which you expect to exceed the threshold, which in practice often means notifying HMRC immediately
Your effective date of registration then follows a set rule rather than the date you happen to submit the form. Under the rolling 12-month test, registration takes effect from the first day of the second month after you went over the threshold. So if your rolling 12-month turnover exceeded £90,000 at the end of June, you’d need to notify HMRC by 30 July, and your registration would take effect from 1 August.
Under the forward-look test, the effective date is the date you realised you’d exceed the threshold, which is why it’s important to register promptly once you spot a large contract coming in rather than waiting to see how things play out.
What if the breach was only temporary?
If you’ve gone over £90,000 because of an unusual one-off spike, a single large project, a seasonal rush, you’re not automatically locked into registration. HMRC allows businesses to apply for an exception from registration if you can demonstrate that your taxable turnover for the next 12 months won’t exceed the £88,000 deregistration threshold.
To apply, you contact HMRC and request the relevant exception forms, then provide evidence supporting your forecast. HMRC reviews the request and either grants the exception or registers you as normal if it isn’t satisfied with your evidence, so this route needs a genuinely solid case, not just optimism about a slow patch ahead.
What counts as taxable turnover?
This trips up more businesses than the deadlines do. Taxable turnover includes the total value of everything you sell that isn’t VAT-exempt, and that’s a wider net than most people expect.
Crucially, it includes:
- Standard-rated sales, taxed at 20%
- Reduced-rated sales, taxed at 5%
- Zero-rated supplies, taxed at 0%, such as most food, children’s clothing and books
That last point catches people out constantly. Zero-rated doesn’t mean the sale is outside the VAT system; it means VAT is charged at 0%, and it still counts fully toward your £90,000 threshold. A business selling entirely zero-rated goods, children’s clothes, for example, can still be legally required to register for VAT even though it never actually charges any VAT to customers.
What doesn’t count toward the threshold is exempt income, such as certain insurance, finance, and education services, since these sit outside the VAT system entirely rather than being taxed at a reduced or zero rate. If your income is genuinely exempt across the board, you don’t register at all, regardless of turnover.
VAT deregistration threshold: coming back out again
If your VAT-registered business shrinks, whether through a quiet year, reduced trading, or a change in direction, you can apply to deregister once your expected taxable turnover for the next 12 months falls below £88,000.
Notice this figure sits £2,000 below the registration threshold rather than matching it exactly. That gap is deliberate; it stops businesses bouncing in and out of VAT registration every time turnover wobbles a few hundred pounds either side of £90,000, which would create unnecessary admin for both the business and HMRC.
Deregistration isn’t automatic and isn’t mandatory even if you qualify. Some VAT-registered businesses, particularly those selling mainly to other VAT-registered businesses, choose to stay registered even after dropping below £88,000, because they can still reclaim VAT on their own purchases (input VAT), which can be worth more to them than the admin saved by leaving the scheme.
Late registration penalties: what happens if you miss the deadline
Missing the 30-day notification window doesn’t just delay things; it triggers a financial penalty on top of any VAT you should have charged and paid over the missed period, according to HMRC’s failure to notify guidance. Penalties are calculated as a percentage of the VAT you owed during the period you should have been registered:
- Less than 9 months late: 5% of the VAT owed, in addition to the original amount
- 9 to 18 months late: 10% of the VAT owed, in addition to the original amount
- Over 18 months late: 15% of the VAT owed, in addition to the original amount
On top of the penalty, you’re still liable for the VAT itself, backdated to the date registration should have taken effect, which is often the most painful part for businesses that didn’t charge VAT to customers during that period and now have to absorb it themselves. This is exactly why keeping an eye on your rolling 12-month figure every month matters more than checking once a year at your accounts deadline.
Voluntary registration: registering before you have to
You don’t have to wait until you cross £90,000. Any business can register for VAT voluntarily, regardless of how far below the threshold its turnover sits, and for some businesses this makes clear financial sense.
Voluntary registration tends to suit businesses that:
- Sell mainly to other VAT-registered businesses, since those customers can reclaim the VAT you charge them, making your prices effectively unchanged from their perspective
- Have significant VATable costs, such as equipment, stock, or premises, where reclaiming input VAT outweighs the admin of charging it on sales
- Want to appear more established, since a VAT number can signal a certain scale to clients and suppliers
It suits fewer businesses that sell mainly to consumers who can’t reclaim VAT, since adding 20% to your prices, or absorbing it yourself, is a real cost without the offsetting benefit that VAT-registered business customers get.
The Flat Rate Scheme: a simpler option worth knowing about
Once registered, standard VAT accounting means calculating VAT on every sale and every purchase separately. The Flat Rate Scheme offers a simpler alternative for smaller businesses: instead of that transaction-by-transaction calculation, you pay HMRC a fixed percentage of your gross (VAT-inclusive) turnover.
You can join if your expected VAT-taxable turnover for the next 12 months is £150,000 or less, excluding VAT, according to GOV.UK’s Flat Rate Scheme guidance. Your flat rate percentage depends on your trade sector, and new registrations get a 1% discount on their rate for the first year.
There’s an important catch for many service businesses: if you spend less than 2% of your turnover on goods (or under £1,000 a year, whichever is greater), you’re classed as a limited cost trader and must use a flat rate of 16.5% regardless of your actual sector rate. For consultants, freelancers and other low-cost-of-goods service businesses, this often removes most of the scheme’s financial benefit, so it’s worth comparing your likely VAT bill under both methods before choosing.
You must leave the Flat Rate Scheme once your turnover, including VAT, exceeds £230,000, at which point standard VAT accounting applies.
FAQs
What is the VAT threshold for 2026?
The VAT registration threshold for 2026/27 is £90,000 of taxable turnover in any rolling 12-month period. This figure has held steady since 1 April 2024 and applies equally across 2024/25, 2025/26 and 2026/27.
When do I need to register for VAT?
You must register within 30 days of your rolling 12-month taxable turnover exceeding £90,000, or immediately if you expect to exceed £90,000 in the next 30 days alone. Your effective registration date usually falls on the first day of the second month after you crossed the threshold.
Do zero-rated sales count toward the VAT threshold?
Yes. Zero-rated supplies, such as most food, children’s clothing and books, are still taxable supplies charged at 0%, so they count fully toward your £90,000 threshold. Only genuinely VAT-exempt income, such as certain insurance and education services, falls outside the calculation.
What is the VAT deregistration threshold?
The deregistration threshold is £88,000. If your expected taxable turnover for the next 12 months falls below that figure, you can apply to deregister, though it isn’t mandatory and some businesses choose to remain registered anyway.
What happens if I register for VAT late?
You’ll owe the VAT that should have been charged since your effective registration date, plus a penalty based on how late you registered: 5% of the VAT owed if less than 9 months late, 10% if 9 to 18 months late, and 15% if more than 18 months late.
Can I register for VAT voluntarily before reaching the threshold?
Yes, any business can register voluntarily regardless of turnover. It tends to make the most sense for businesses selling mainly to other VAT-registered businesses or with significant VATable costs to reclaim, and less sense for businesses selling mainly to consumers.
What counts as taxable turnover for VAT purposes?
Taxable turnover includes standard-rated, reduced-rated and zero-rated sales combined, essentially everything you sell that isn’t specifically VAT-exempt. It’s measured on a rolling 12-month basis, not your accounting or tax year.
Is the Flat Rate Scheme worth it for a small business?
It can be, particularly for businesses with low VATable costs and turnover under £150,000, since it simplifies VAT reporting into a single percentage of gross turnover. It’s often less beneficial for service businesses classed as limited cost traders, who must use the higher 16.5% rate regardless of sector.
