What is the VAT registration threshold?

The threshold is not tested only at your year end. You need to look at taxable turnover across the previous 12 months on a rolling basis.

You can register voluntarily below the threshold. That can help reclaim VAT on costs, but it also adds admin and may affect pricing for customers who cannot reclaim VAT.

Taxable turnover is the value of supplies that are standard-rated, reduced-rated or zero-rated, plus certain other supplies covered by the VAT rules. Zero-rated sales still count even though VAT is charged at 0%. Exempt and outside-the-scope income is generally treated differently.

The test uses turnover before expenses, not accounting profit. A business with low margins can therefore cross the threshold even if its profit is modest. Monitor a month-by-month rolling total rather than waiting for the financial year end.

Under the backward-looking test, check taxable turnover for the previous 12 months at the end of every month. If it has gone over the threshold, the application and effective registration dates follow the timetable in HMRC’s guidance.

The forward-looking test is separate. If you realise taxable turnover will exceed £90,000 in the next 30 days alone, registration can take effect from the date you realised. One large contract can therefore trigger registration before a rolling annual total has crossed the threshold.

You can apply for an exception if the threshold was exceeded only temporarily and you can demonstrate that future taxable turnover should remain below the deregistration threshold. HMRC must agree; simply expecting sales to fall does not cancel the duty to apply.

Voluntary registration may allow input VAT recovery, but it also creates invoicing, digital-record and return obligations. If a registered business later stops making taxable supplies or qualifies to cancel, use the current deregistration rules and consider VAT due on assets held at cancellation.