VAT Registration in the UK: Threshold, Rates and How to Register

Value Added Tax, or VAT, is one of the most misunderstood taxes in UK business. Many new owners assume it only applies to large companies, then get an unwelcome surprise when HMRC tells them they should have registered months ago — and backdates the bill.

This guide explains the VAT registration threshold, the current VAT rates, when registration is compulsory, when it is optional, and exactly how to register online. It reflects the rules for the 2026/27 tax year, at the time of writing.

What Is VAT, in Plain English?

VAT is a tax on the sale of goods and services. If you are VAT-registered, you charge VAT on the invoices you send to customers (output VAT) and you can reclaim the VAT you pay on business purchases (input VAT). Every three months, you report both to HMRC on a VAT return and pay over the difference.

If you are not VAT-registered, you simply do not charge VAT — but you also cannot reclaim it on your costs.

The VAT Registration Threshold: £90,000

For the 2026/27 tax year, you must register for VAT if your VAT-taxable turnover exceeds £90,000 in a rolling 12-month period. The threshold has been frozen at this level since April 2024.

There are two tests, and meeting either one makes registration compulsory:

1. The backward look: at the end of every month, add up your VAT-taxable turnover for the previous 12 months. If the total is more than £90,000, you must register.
2. The forward look: if at any point you expect your taxable turnover in the next 30 days alone to exceed £90,000 (for example, you just signed a large contract), you must register immediately.

Important details many people get wrong:

• It is a rolling 12 months, not your accounting year or the tax year.
• It is based on turnover, not profit. A business with £95,000 of sales and £80,000 of costs is still over the threshold.
• Zero-rated sales count towards the threshold, but exempt sales do not.
• The sales of capital assets (like a van you sell) are excluded.

If you cross the threshold, you must notify HMRC within 30 days. Register late and HMRC backdates your registration, so you owe the VAT on those sales whether or not you actually charged it.

Current VAT Rates in the UK

There are three rates of VAT:

• Standard rate: 20% — applies to most goods and services.
• Reduced rate: 5% — applies to items such as domestic fuel and power, children’s car seats, and some energy-saving materials.
• Zero rate: 0% — applies to most food, books and newspapers, children’s clothes, and most exports.

Some supplies are exempt (insurance, most financial services, education, health services). Zero-rated and exempt look identical to the customer, but they are treated differently: zero-rated sales count towards the registration threshold and input VAT can be reclaimed; exempt sales do neither.

Can You Register Voluntarily?

Yes. You can register for VAT at any turnover level, even below £90,000. Whether this makes sense depends entirely on your customers:

• Worth it if you sell mainly to businesses: they can reclaim the VAT you charge, so your price is no obstacle, while you reclaim VAT on your own costs and startup spending.
• Usually not worth it if you sell mainly to consumers: they cannot reclaim VAT, so adding 20% either makes you more expensive or eats your margin.

Voluntary registration can also make a young business look more established, and it is essential if you want to reclaim VAT on significant setup costs.

VAT Schemes Worth Knowing About

When you register, you will need to choose how you account for VAT:

• Standard scheme: quarterly VAT returns, the default for most businesses.
• Flat Rate Scheme: available for businesses with turnover up to £150,000. You pay a fixed percentage of turnover instead of tracking every input — simpler, but you give up input VAT reclaims.
• Cash Accounting Scheme: available for turnover up to £1.35 million. You account for VAT when you are paid, not when you invoice — helpful if customers pay slowly.
• Annual Accounting Scheme: one VAT return per year with monthly or quarterly payments.

How to Register for VAT: Step by Step

1. Go to the official service. Registration is free and done online through the official VAT registration service on GOV.UK.
2. Set up Making Tax Digital software first. VAT returns must be submitted using MTD-compatible accounting software such as Xero, QuickBooks, or FreeAgent. You cannot file VAT returns on paper.
3. Provide your business details. You will need your company or business details, your VAT-taxable turnover figures, and your bank details for VAT repayments and Direct Debits.
4. Choose your VAT scheme. Decide on standard, flat rate, cash accounting, or annual accounting.
5. Wait for your VAT number. HMRC usually processes applications within 30 working days. You will receive a VAT registration number and a certificate.
6. Start charging VAT from your registration date. You must not charge VAT before your effective date of registration, and you must charge it from that date onwards.

Common VAT Mistakes to Avoid

• Waiting until year end to check turnover. The test is monthly and rolling; track it every month.
• Forgetting the forward-looking test. One large contract can trigger registration in 30 days.
• Confusing zero-rated and exempt. Only zero-rated sales count towards the threshold.
• Charging VAT before registering. You cannot charge VAT until your registration date.
• Assuming the threshold protects you if you cross it once. If you go over, you must register — unless you can convince HMRC your turnover will stay below the £88,000 deregistration threshold going forward, in which case you can ask for an exception.

FAQs About VAT Registration in the UK

What is the VAT registration threshold in 2026/27?

The threshold is £90,000 of VAT-taxable turnover in a rolling 12-month period. The deregistration threshold is £88,000.

How long does VAT registration take?

HMRC usually processes applications within 30 working days. Apply as soon as you know you will cross the threshold rather than waiting until the last day.

Is VAT registration free?

Yes. Registering for VAT on GOV.UK costs nothing. The costs are your time and, usually, accounting software.

Do I need an accountant for VAT?

You do not legally need one, but VAT rules are one of the areas where professional advice pays for itself — a single mistake can cost far more than an accountant’s fee.

Conclusion

VAT registration comes down to one number: £90,000 of taxable turnover in a rolling 12 months. Track it monthly, register within 30 days of crossing it, and set up MTD-compatible software before you register. Get this right and VAT becomes a routine part of running your business rather than a source of nasty surprises.

For more on the foundations of UK business, browse our Business category, including our step-by-step guide to registering a limited company.

You can work out the figures in seconds with our free VAT calculator.