The UK VAT threshold is £90,000 for 2025/26 - but it's measured on a rolling 12-month basis, not your tax year, and that catches out more growing businesses than any other rule. Here's exactly how it works, every figure sourced to GOV.UK.
VAT is the tax that small businesses worry about most and understand least — usually because the guides they find are out of date. So let us start with the number that matters, current for the 2025/26 tax year and unchanged into 2026/27:
You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period. Not your tax year. Any rolling 12 months. That single distinction catches out more growing businesses than any other rule in the system.
The threshold rose from £85,000 to £90,000 on 1 April 2024 — the first increase in seven years — and has remained at £90,000 since (GOV.UK: VAT registration thresholds). If you are reading an older guide that says £85,000, it is wrong, and this is a topic where "wrong by a year" means "wrong by £5,000 of turnover." Always check the date on VAT advice.
Value Added Tax is a consumption tax charged on most goods and services in the UK. Once registered, your business becomes an unpaid tax collector for HMRC: you charge VAT on your sales (output tax), you reclaim VAT on your business purchases (input tax), and each quarter you pay HMRC the difference. The final consumer bears the cost; you simply move it along the chain.
There are three rates (GOV.UK: VAT rates):
| Rate | Applies to |
|---|---|
| 20% standard | Most goods and services |
| 5% reduced | Domestic energy, children's car seats, some others |
| 0% zero-rated | Most food, books, children's clothing |
Zero-rated is not the same as exempt, and the difference decides your threshold. Zero-rated sales are still taxable — just at 0% — so they count toward your £90,000. Exempt sales (insurance, most finance and education) do not count. A bookshop selling zero-rated books can still be required to register; an insurance broker making only exempt supplies is not. Get this wrong and you either register when you needn't or miss the point when you must.
HMRC does not look at your accounting year. It uses a rolling 12-month window that moves forward one month at a time. At the end of every calendar month, you add that month's taxable turnover to the previous 11 and check whether the total has passed £90,000 (GOV.UK: When to register for VAT).
This is why a seasonal business can cross the line in August even though its calendar-year total is comfortably under £90,000 — a quiet spring followed by a strong summer tips the trailing twelve months over, and the annual figure never sees it. You should be checking your rolling total at every month-end, not once a year.
Once you cross the threshold, the timing is precise:
A concrete example. Your rolling turnover passes £90,000 during July. You must notify HMRC by 30 August (30 days from the end of July). You must start charging VAT from 1 September — the first day of the second month after July. Every invoice from that date carries VAT.
There is a second trigger. If you have reasonable grounds to expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register — and here the clock starts the day you realise, not at any month-end. Win a single £100,000 contract you will deliver inside a month and you are over the threshold the day you sign it, even if your trailing twelve months is tiny. If a big contract is on the table, take advice before you sign.
Registering for VAT through your Government Gateway account is free. HMRC charges no registration fee, whatever the "VAT registration cost" search results imply (GOV.UK: Register for VAT). The only cost is your time, or an accountant's fee if you ask someone to handle it — which buys you the registration done right and the correct scheme chosen from the start.
You can register at any turnover. HMRC figures have historically shown around half of VAT-registered businesses are voluntarily registered below the threshold. It can make sense when:
It makes less sense if you sell mainly to consumers or other non-registered businesses, because adding 20% either makes you more expensive or eats your margin. Note that once voluntarily registered you generally cannot deregister for 12 months.
Instead of tracking VAT on every purchase and sale, you pay HMRC a single flat percentage of your gross turnover and keep the difference. Available if you expect taxable turnover of £150,000 or less (excluding VAT) in the next 12 months (GOV.UK: Flat Rate Scheme). It trades some accuracy for far less admin — good for service businesses with few costs.
Under standard VAT accounting you owe VAT when you invoice, even if the customer hasn't paid. Cash accounting lets you account for VAT when money actually changes hands — you pay HMRC when your customer pays you, and reclaim when you pay your supplier. Available up to £1.35 million of taxable turnover, and a real cash-flow help if you're paid late (GOV.UK: Cash Accounting Scheme).
VAT-registered businesses must keep digital records and file returns through MTD-compatible software — Xero, QuickBooks, FreeAgent, Sage and others. HMRC's old online VAT portal is closed to new submissions. You must keep VAT records for 6 years (GOV.UK: VAT record keeping). Set your software up before your effective registration date — retrofitting it to a year of historical invoices afterwards is far harder than starting clean.
Two things compound. First, HMRC backdates your registration to the date you should have registered, and you owe the VAT you should have charged from then — even though you never collected it. If your customers were VAT-registered you can issue VAT-only invoices to recover it; if they were consumers, the liability falls on you. Second, a failure-to-notify penalty sits on top, as a percentage of the VAT owed.
The one piece of good news about late registration: if the failure was genuinely an oversight rather than deliberate, and you come forward voluntarily before HMRC contacts you, the penalty can be reduced — potentially to nothing. The lesson is universal: if you have missed the deadline, disclose it yourself, quickly. Volunteering beats being caught, every time.
This is general information about UK VAT, not tax advice. ToolsNook is not an accountancy practice or a tax adviser. VAT treatment depends on what you sell, your registration status and your circumstances, and the rules change. Verify everything against the linked GOV.UK guidance and take advice from a qualified accountant before acting. Figures are current for the 2025/26 tax year as of July 2026.