The £90,000 VAT Registration Threshold Explained
It's based on taxable turnover — not profit. Here's how long you have to register, and exactly how to do it.
What Is the VAT Registration Threshold?
You must register for VAT with HMRC once your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the 2024/25 threshold, still in force for 2026/27). This is one of the most misunderstood rules in UK tax — and getting it wrong can be expensive.
The single most important point to understand: the threshold is based on turnover, not profit. It's the total value of everything you sell that isn't VAT-exempt — before any costs, expenses, salaries, or tax are deducted. A business making £95,000 in sales but only £20,000 in profit still has to register.
Turnover vs Total Income — What Counts?
"VAT-taxable turnover" is the total of all sales that aren't VAT-exempt. It includes:
- Standard-rated sales (20%)
- Reduced-rated sales (5%)
- Zero-rated sales (0% — yes, these still count)
- Goods you hire out or loan to customers
- Goods exchanged, bartered, or given as gifts
- Services you receive from outside the UK that you have to "reverse charge"
It does not include VAT-exempt sales (e.g. most insurance, finance, education, and some property), goods or services sold outside the scope of UK VAT, or capital asset disposals like selling a company vehicle.
How Long Do You Have to Register?
There are two separate triggers, and each comes with its own deadline:
1. The "Backwards Look" (Historic Test)
If your rolling 12-month turnover exceeds £90,000 at the end of any month, you have 30 days from the end of that month to register. Your effective VAT date is the first day of the second month after you went over.
2. The "Forwards Look" (Future Test)
If you expect turnover in the next 30 days alone to exceed £90,000 (e.g. a single large contract), you must register immediately. Your effective VAT date is the date you became aware.
Example: If your rolling 12-month turnover hits £91,000 at the end of June, you must register by 30 July, and your effective VAT date is 1 August — meaning you need to start charging VAT on sales from that date.
How Do You Actually Register?
VAT registration is usually done online at gov.uk/register-for-vat using a Government Gateway ID. A limited company needs its company registration number, bank details, UTR, annual turnover and estimated taxable turnover for the next 12 months; individuals and partnerships need a National Insurance number, an identity document, bank details and turnover figures.
Note that you cannot show VAT on your invoices until your VAT registration number arrives. You're still liable for VAT from your effective date of registration, so the usual approach is to increase your prices to cover the VAT due and reissue proper VAT invoices once HMRC issues your number.
For the full walkthrough — information checklists, scheme choice, timings and what happens after you apply — read our dedicated guide: How to Register for VAT with HMRC.
What Happens If You Register Late?
Late registration is one of the most costly mistakes a small business can make. HMRC will backdate your registration to the date you should have registered — and you'll owe VAT on every sale made since that date, even though you didn't charge it to your customers. In most cases, you'll have to absorb that cost yourself.
On top of that, HMRC issues failure to notify penalties calculated as a percentage of the VAT you owe — ranging from 0% (if disclosed within 12 months and unprompted) up to 30% (or higher for deliberate non-compliance). Interest is also charged on the unpaid VAT.
Should You Register Voluntarily?
You can register before you hit £90,000. It's worth considering if:
- Your customers are mostly VAT-registered businesses (they reclaim the VAT, so it doesn't cost them anything)
- You buy a lot of stock, equipment, or services with VAT on them — you can reclaim that input VAT
- You want the credibility and "professional" appearance of being VAT-registered
It's usually a poor idea if you sell mainly to consumers or non-VAT-registered businesses, as adding 20% to your prices makes you less competitive.
Free: 2026/27 Tax Deadline Calendar
Every key HMRC date for the tax year — self-assessment, corporation tax, VAT, payroll, and more. Sent straight to your inbox as a PDF.
No spam. Unsubscribe anytime.
Related Articles
Common Questions
Is the VAT threshold based on profit or turnover?
It's based on VAT-taxable turnover — the total value of your sales (excluding VAT-exempt items), before any costs are deducted. Profit is irrelevant for the threshold test. A business making £95,000 in sales but only £15,000 in profit still has to register.
How long do I have to register for VAT once I go over £90,000?
You have 30 days from the end of the month in which your rolling 12-month turnover passed £90,000. Your effective VAT registration date is the first day of the second month after you went over. If you expect a single 30-day period to exceed £90,000 by itself, you must register immediately.
Does turnover include zero-rated sales?
Yes. Zero-rated sales (such as most food, children's clothing, and books) count towards your VAT-taxable turnover even though they're charged at 0%. Only VAT-exempt sales (like insurance and most education services) are excluded.
What happens if I forget to register on time?
HMRC will backdate your registration to the date you should have registered. You'll owe VAT on all sales made since that date — even though you didn't charge customers for it — plus a failure-to-notify penalty (typically up to 30% of the VAT due) and interest.
Can I register for VAT before I reach £90,000?
Yes — voluntary registration is allowed at any turnover level. It's worthwhile if your customers are VAT-registered businesses or you have significant input VAT to reclaim. It's usually a bad idea if your customers are mainly consumers.
How long does VAT registration take?
HMRC aims to process VAT registrations within around 30 working days, longer if it asks for extra evidence. You cannot show VAT on invoices until your VAT number arrives, but you're liable for VAT from your effective registration date — so increase prices to cover it and reissue VAT invoices once the number comes through.
Approaching the VAT threshold?
Our accountants in Brentwood handle VAT registration, scheme selection, and ongoing returns for businesses across Essex. Contact us before you hit £90,000 — getting the timing right matters.