You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period. This is the VAT registration threshold for 2024/25. It is not based on your financial year. It is based on any 12 consecutive months.
Missing the registration deadline is one of the most costly mistakes a small business can make. HMRC charges backdated VAT on all sales from the date you should have registered, plus penalties and interest. This guide explains exactly when you must register, when voluntary registration makes sense, and what the process involves.
The VAT Registration Threshold
The current VAT registration threshold is £90,000 in taxable turnover. This figure has been frozen until at least April 2026.
Taxable turnover includes all sales of goods and services that are subject to VAT at any rate — standard rate (20%), reduced rate (5%), or zero rate (0%). It does not include VAT-exempt supplies such as financial services, insurance, or private education.
| Rolling 12-month rule HMRC looks at your turnover over any 12-month period, not just your financial year or tax year. That means you need to check your turnover at the end of every month against the previous 12 months. If you exceed £90,000 at any point, the 30-day registration clock starts immediately. |
When Must You Register for VAT?
You must register for VAT in two situations:
1. Historic test (threshold already exceeded)
If your taxable turnover in the past 12 months has exceeded £90,000, you must register. You have 30 days from the end of the month in which you exceeded the threshold to notify HMRC. Your VAT registration takes effect from the first day of the second month after you exceeded the threshold.
Example: if your turnover exceeded £90,000 by 20 March, you must notify HMRC by 30 April. Your registration becomes effective from 1 May.
2. Future test (threshold likely to be exceeded)
If at any point you expect your turnover to exceed £90,000 in the next 30 days alone, you must register immediately. Your registration takes effect from the start of that 30-day period.
This applies to one-off large contracts. If you sign a single contract worth £100,000, you must register for VAT straightaway, even if your previous turnover was well below the threshold.
What Happens if You Miss the Registration Deadline?
If HMRC discovers you exceeded the threshold and did not register in time, they will:
- Register you retrospectively from the date you should have registered
- Calculate the VAT you should have charged on all sales since that date
- Issue a bill for that VAT, which you must pay whether or not you collected it from your customers
- Charge a penalty of between 5% and 15% of the VAT owed, depending on how late you were
- Add interest on the outstanding amount
In practice, this means you end up paying VAT out of your own pocket on sales you did not charge VAT on. For businesses with tight margins, this can be devastating.
Should You Register Voluntarily Before Reaching the Threshold?
Yes, in some situations. Voluntary VAT registration can benefit your business even before you hit £90,000.
| Voluntary Registration Benefits | Voluntary Registration Drawbacks |
| Reclaim VAT on business purchases and expenses | You must charge VAT on your invoices |
| Appear more credible to VAT-registered business clients | Adds quarterly admin and filing obligations |
| Reclaim VAT on pre-registration purchases (up to 4 years for goods, 6 months for services) | Customers who are not VAT-registered pay more |
| Access to VAT schemes that may reduce your bill | Must keep detailed VAT records |
Voluntary registration is particularly beneficial if most of your clients are VAT-registered businesses. They can reclaim the VAT you charge, so adding VAT to your invoices does not affect the net cost to them. You, meanwhile, can reclaim VAT on all your business purchases.
If your clients are mainly consumers or small businesses that are not VAT-registered, adding VAT to your prices makes you more expensive to them. In that case, voluntary registration may not be the right move until you have to.
How to Register for VAT
Step 1. Register online through HMRC. You can register for VAT through your Government Gateway account at gov.uk. Most businesses register online. The process takes around 20 minutes if you have your business details ready.
Step 2. Choose your VAT scheme. When registering, you choose which VAT scheme to use. The main options are the Standard Rate Scheme, Flat Rate Scheme, Cash Accounting Scheme, and Annual Accounting Scheme. Your accountant can advise which suits your business.
Step 3. Receive your VAT number. HMRC issues your VAT registration number within a few weeks. You must display this on all VAT invoices. In the meantime, HMRC may provide a temporary number to use.
Step 4. Start charging VAT. From your effective registration date, you must charge VAT on all taxable supplies. Issue VAT invoices showing the VAT amount separately.
Step 5. Submit VAT returns. Most businesses file quarterly VAT returns through Making Tax Digital (MTD) compatible software. Returns are due one month and seven days after the end of each quarter.
VAT Registration and Making Tax Digital
All VAT-registered businesses must use Making Tax Digital (MTD) for VAT. This means you must keep digital VAT records and submit VAT returns using MTD-compatible software. You cannot file VAT returns manually through HMRC’s website.
Compatible software includes Xero, QuickBooks, Sage, and several others. HMRC provides a full list of approved software on their website.
Reclaiming VAT on Pre-Registration Purchases
Once registered, you can reclaim VAT on certain purchases made before your registration date:
- Goods: VAT can be reclaimed on goods bought up to four years before your registration date, provided you still hold those goods
- Services: VAT can be reclaimed on services bought up to six months before your registration date
This can result in a significant refund if you made large purchases before registering. Make sure you have VAT receipts and invoices for everything you intend to claim.
Frequently Asked Questions
What is the VAT threshold in the UK for 2024/25?
The VAT registration threshold is £90,000 in taxable turnover in any rolling 12-month period. This applies for 2024/25 and has been frozen until at least April 2026.
Do I include zero-rated sales in my VAT turnover calculation?
Yes. Zero-rated sales are still taxable supplies and count toward the £90,000 threshold. Only VAT-exempt supplies (such as financial services, insurance, and private healthcare) are excluded from the threshold calculation.
Can I deregister from VAT if my turnover drops?
Yes. You can apply to deregister if your taxable turnover falls below £88,000 and you expect it to stay below that level. The deregistration threshold is slightly below the registration threshold to prevent businesses repeatedly registering and deregistering as their turnover fluctuates around £90,000.
Do I need to charge VAT on all my sales once registered?
You must charge VAT on all taxable supplies at the appropriate rate. Standard-rated supplies are charged at 20%, reduced-rated supplies at 5%, and zero-rated supplies at 0%. VAT-exempt supplies do not have VAT charged on them, but you also cannot reclaim input VAT related to exempt supplies.
How long does VAT registration take?
Online VAT registration typically takes two to four weeks for HMRC to process. You can request an exception to VAT registration if you only make zero-rated supplies, but this must be applied for separately. In the meantime, you should be ready to issue VAT invoices from your effective registration date.
Need Help With VAT Registration?
M&B Tax Services handles VAT registration, scheme selection, and quarterly returns for small businesses and limited companies across the UK. We make sure you register at the right time and on the right scheme from day one.
We are ICB-regulated accountants based in Rugby. If your turnover is approaching £90,000 or you are unsure whether you should register voluntarily, we can give you a straight answer.
Book a free 30-minute call and we will review your VAT position at no cost.
Joanna Bruty
- On this page