When to register for VAT in the UK (2026 thresholds)

The current VAT threshold

Since 1 April 2024, the compulsory VAT registration threshold sits at £90,000. This was increased from £85,000, where it had been frozen since 2017. The deregistration threshold is £88,000.

These figures refer to your taxable turnover over a rolling 12-month period. Not your profit, not your calendar year revenue, but total taxable sales in any consecutive 12 months. If you hit £90,001 in any rolling window, you have 30 days to notify HMRC.

For tradespeople, this catches out more people than you would expect. A busy electrician charging £400 per day, working 5 days a week for 46 weeks, turns over £92,000. That is over the threshold.

Compulsory vs voluntary registration

There are two routes to VAT registration, and they suit different situations.

Compulsory registration

You must register if:

• Your taxable turnover exceeded £90,000 in the last 12 months (the "historic test")
• You expect your taxable turnover to exceed £90,000 in the next 30 days alone (the "future test")

The historic test catches most people. At the end of every month, look back 12 months. If the total exceeds £90,000, you must register within 30 days. Your effective date of registration is the first day of the second month after you exceeded the threshold.

Miss the deadline and HMRC will backdate your registration. You will owe VAT on sales you made from the date you should have been registered, even though you did not charge it.

Voluntary registration

You can register even if you are below the threshold. This makes sense when:

• Most of your customers are VAT-registered businesses (they reclaim the VAT you charge, so it costs them nothing)
• You buy a lot of VAT-inclusive materials and want to reclaim input VAT
• You want to appear larger or more established to commercial clients
• You are close to the threshold and want to avoid a sudden price increase when you hit it

For a carpenter buying £15,000 of timber and materials a year, voluntary registration recovers £3,000 in VAT. If their customers are mostly other businesses, everyone benefits.

How to monitor your threshold

Most accounting software tracks this automatically. But if you are managing your own books, set a calendar reminder at the end of each month to add up your last 12 months of invoices.

Use our VAT calculator to work out how VAT affects your pricing, and our invoice generator to create VAT-compliant invoices once registered.

Do not include exempt income in your calculation. If you earn money from something that is VAT-exempt (like insurance or education), that does not count towards the £90,000.

Choosing a VAT scheme

Once registered, you have options for how you account for VAT:

The Flat Rate Scheme is popular with tradespeople. An electrician on the flat rate pays 14.5% to HMRC but charges clients 20%. On a £10,000 quarterly turnover, that is a saving of £550. Read our guide to the Flat Rate VAT Scheme for trades.

How to register

Register online through your Government Gateway account. You will need:

• Your National Insurance number or company registration number
• Details of your business (address, bank account, turnover)
• Your expected taxable turnover for the next 12 months

Online registration typically takes 5-10 working days. HMRC sends your VAT registration certificate with your VAT number, effective date, and first return period.

What changes when you are VAT registered

Three things change immediately:

1. Your invoices must include specific VAT information. Your VAT number, the VAT rate, the VAT amount, and the total including VAT. Our invoice generator handles this automatically.
2. You file VAT returns. Usually quarterly, through Making Tax Digital compatible software. Returns are due one month and seven days after the end of each quarter.
3. Your prices effectively increase for non-VAT-registered customers. Residential customers and small businesses below the threshold cannot reclaim VAT, so your price goes up 20% unless you absorb it.

The pricing dilemma for tradespeople

This is the big one. When you register for VAT, do you add 20% to your prices or absorb the cost?

For commercial clients who are VAT-registered themselves, add it on. They reclaim it, so it makes no difference to them.

For residential clients, you have a choice. Most tradespeople find a middle ground: they increase prices by 10-15% and absorb the rest. The Flat Rate Scheme helps here because you pay less than 20% to HMRC, so the gap between what you charge and what you keep is smaller.

Frequently asked questions

Does the £90,000 threshold include expenses?

No. The threshold is based on taxable turnover (total sales), not profit. Your expenses are irrelevant to the calculation.

What happens if I go over the threshold and do not register?

HMRC will backdate your registration and you will owe VAT on all taxable sales from the date you should have registered. You may also face a penalty of up to 100% of the VAT due, though first-time offenders usually receive a lighter penalty.

Can I deregister if my turnover drops below the threshold?

Yes. If your taxable turnover drops below £88,000, you can apply to deregister. You do not have to, and staying registered may still be beneficial if you reclaim more input VAT than you charge.

Do I charge VAT on work outside the UK?

Generally no. Services supplied to customers outside the UK are usually outside the scope of UK VAT. But the rules vary depending on the type of service and whether the customer is a business or consumer. Check the HMRC place of supply rules.

Should I register voluntarily if I am close to the threshold?

If you are within £5,000-£10,000 of the threshold and growing, voluntary registration avoids the shock of a sudden price increase. It also means you can reclaim VAT on any large purchases (tools, a van, equipment) made after registration.