The UK VAT threshold: rolling 12 months, not your accounting year
The VAT registration threshold is £90,000, and the rule that catches people is not the threshold itself — it is that there are two tests, one looking backwards and one looking forwards, and the forward-looking one can require registration with 30 days' notice on a single contract.
The figures
| Item | Amount |
|---|---|
| Registration threshold | £90,000 |
| Deregistration threshold | £88,000 |
| Standard rate | 20% |
| Reduced rate (certain fuel and power, some residential works) | 5% |
| Zero rate (newspapers, children's clothes) | 0% |
| VAT fraction for a standard-rated inclusive price | 1/6 |
The £2,000 gap between registering at £90,000 and deregistering at £88,000 exists to stop businesses hovering on the line from moving in and out every quarter.
The backward test and the forward test
Both tests are set out in Schedule 1 to the Value Added Tax Act 1994.
Backward look: registration is required where taxable supplies exceeded £90,000 in the previous 12 months. This is a rolling twelve months, not your accounting year — it must be recalculated every month.
Forward look: registration is also required where taxable supplies are expected to exceed £90,000 in the next 30 days alone. This is the test that surprises people. A business turning over £40,000 a year that signs a single £95,000 contract deliverable next month must register on the forward look, despite a rolling turnover nowhere near the threshold.
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Avail our UK tax desk servicesA worked rolling calculation
Take a consultancy billing unevenly:
| Rolling 12 months to | Taxable supplies | Position |
|---|---|---|
| 31 May | £79,400 | Below |
| 30 June | £86,100 | Below — monitor closely |
| 31 July | £91,800 | Threshold crossed |
The rolling total passed £90,000 during July. Two dates now matter and they are not the same: notify HMRC by 30 August (the end of the month following the month the threshold was crossed), and the registration takes effect from 1 September.
The cost of missing this is specific. Once registered from 1 September, VAT is due on standard-rated supplies made from that date whether or not you charged it. On £30,000 of supplies invoiced without VAT, the £30,000 is treated as VAT-inclusive: £30,000 × 1/6 = £5,000 owed to HMRC out of money you never collected. Going back to clients months later to ask for 20% more is the conversation this rule creates.
Registering before you have to
Voluntary registration below £90,000 can be the right answer, and the deciding factor is who your customers are.
| Situation | Effect of registering |
|---|---|
| Mostly VAT-registered business customers | Usually positive — they reclaim the VAT, you reclaim input tax |
| Mostly consumers | Usually negative — either prices rise 20% or your margin absorbs it |
| Zero-rated outputs, standard-rated inputs | Often strongly positive — reclaim input tax, charge 0% |
| Large equipment purchase imminent | Recovers input tax on the purchase |
On £60,000 of turnover to consumers, registering means either charging £72,000 or keeping £50,000 net of the £10,000 VAT — a £10,000 decision either way. On the same £60,000 to VAT-registered businesses, the VAT is neutral to them and you recover input tax you were previously absorbing.
Working backwards from an inclusive price
The 1/6 fraction is the everyday tool once registered, because customers negotiate gross prices while HMRC wants the net split.
| Gross (inclusive) | VAT at 1/6 | Net |
|---|---|---|
| £1,200 | £200 | £1,000 |
| £6,000 | £1,000 | £5,000 |
| £18,000 | £3,000 | £15,000 |
Take a £6,000 inclusive quote: £6,000 × 1/6 = £1,000 of VAT, leaving £5,000 of revenue. Applying 20% to the £6,000 instead gives £1,200 — a £200 error per invoice, and it always errs against you.
After registration
Returns are filed under Making Tax Digital, and the late-submission regime is points-based rather than an immediate fine: a point per late return, with a £200 penalty at four points for a quarterly filer, and a further £200 for each subsequent late return. See filing VAT returns under MTD.
Where this goes wrong
- Checking the accounting year instead of a rolling twelve months. The test does not reset in April.
- Ignoring the 30-day forward look. One large contract can trigger registration on its own.
- Confusing the notify date with the effective date. Liability starts from the effective date regardless of when you got round to registering.
- Assuming unbilled VAT is lost revenue you can waive. HMRC treats the price as VAT-inclusive at 1/6.
- Excluding zero-rated sales from the test. Zero-rated supplies are taxable supplies and count towards £90,000; exempt supplies do not.
Related: Corporation Tax and forming a UK limited company.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
What is the UK VAT registration threshold?
GBP 90,000 of VAT-taxable turnover in any rolling 12-month period, unchanged since 1 April 2024. The deregistration threshold sits lower, at GBP 88,000.
Is the threshold tested against my accounting year?
No, and this is the most common error. It is a rolling 12-month test, recalculated at every month end. It does not reset on 6 April or on your year end.
What is the forward-look test?
If you expect to exceed the threshold within the next 30 days alone, registration is required immediately. A single large contract can therefore trigger it before any invoice is raised.
Do I have separate thresholds for separate businesses?
Not as a sole trader. HMRC assesses your total taxable turnover across all your self-employed activities together, so two trades each under the threshold can combine to exceed it.
How long do I have to notify?
Within 30 days of the end of the month in which you crossed the threshold. Your effective registration date is generally the first day of the month after that.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
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