VAT Registration Threshold UK 2025: When Do You Need to Register?

One of the most common VAT mistakes is businesses not realising they've crossed the VAT threshold until months after the fact. By then, they owe VAT on historical sales, face penalties, and have to deal with the headache of backdated registration. This guide will make sure that doesn't happen to you.

What is the VAT registration threshold in 2025?

The VAT registration threshold for 2025-26 is £90,000. This figure has been in place since 1 April 2024, when it was increased from £85,000.

The Chancellor announced in the 2024 Autumn Budget that the threshold would remain at £90,000 until at least April 2026. This is a welcome freeze after years of being held at £85,000 — which had effectively brought more and more businesses into the VAT net as their turnover grew with inflation.

There is also a deregistration threshold of £88,000. If your taxable turnover drops below this level, you may apply to deregister — but you can't if you expect it to exceed the registration threshold again in the next 12 months.

How the threshold works — the rolling 12-month rule

This is where many businesses trip up. The VAT threshold isn't a calendar year thing — it's calculated on a rolling 12-month basis.

At the end of every calendar month, you must look back at the last 12 months. If your taxable turnover for those 12 months exceeds £90,000, you must register for VAT.

Example: Your business has the following monthly turnover:

• April 2024 to February 2025: £7,500/month = £82,500
• March 2025: £8,500 (a good month)
• Total for the 12 months: £91,000

At the end of March 2025, you've exceeded £90,000 and must register. You have 30 days to notify HMRC from that date.

This isn't a cumulative "once you hit £90k total in your business life" rule. It resets each month — so if your business has a slow period, your rolling 12-month figure may drop back below the threshold. But you'll need to keep monitoring it every month.

When must you register?

There are two triggers for mandatory VAT registration:

1. Historic test (backward-looking)

At the end of any calendar month, if your taxable turnover in the previous 12 months has exceeded £90,000, you must register. You have 30 days to notify HMRC. Your registration takes effect from the first day of the month after those 30 days expire — or earlier if you agree with HMRC.

2. Future test (forward-looking)

If at any point in a 30-day period you have reasonable grounds to believe your turnover will exceed £90,000 in the next 30 days — you must register immediately. You don't get the usual 30-day notice period. Registration is required from the start of those 30 days.

This typically applies when a business wins a large contract or gets a sudden influx of orders. If you sign a £100,000 contract in October, you need to register from 1 October, even if no invoices have been raised yet.

What counts towards the threshold?

The threshold applies to your taxable turnover — which is the total value of everything you supply that is subject to VAT. This includes:

• Standard-rated supplies (20%)
• Reduced-rate supplies (5%)
• Zero-rated supplies (0%) — this surprises many people, but zero-rated sales do count

What does not count:

• Exempt supplies (such as certain financial services, insurance, and commercial renting of land)
• Out-of-scope supplies (outside the scope of UK VAT)
• Sales of capital assets used in your business (e.g., selling a company vehicle)
• Any VAT you have already charged (the threshold is based on VAT-exclusive amounts)

Voluntary VAT registration

You can register for VAT voluntarily even if your turnover is below £90,000. This can make commercial sense in certain situations:

• You sell to VAT-registered businesses — they can reclaim the VAT you charge, so it costs them nothing extra. Being VAT registered can make you appear more established.
• You have significant input tax to reclaim — if you spend heavily on VAT-able expenses (equipment, materials, etc.), reclaiming input VAT can give you a meaningful cash flow benefit.
• You're approaching the threshold — registering voluntarily gives you time to set up your accounting systems before you're legally obliged to.

The downside: once registered, you must charge VAT on all your taxable supplies, comply with Making Tax Digital, and submit quarterly returns. If your customers are the public (end consumers rather than businesses), adding 20% to your prices may make you less competitive.

How to register for VAT

VAT registration is done online via HMRC's Government Gateway. The process typically takes 10–15 working days, though it can be quicker. You'll need:

• Your business details (name, address, contact information)
• Your business's unique taxpayer reference (UTR) if you're self-employed or a partnership
• Your company registration number if you're a limited company
• Your business bank account details
• Details of your taxable turnover and when it exceeded (or will exceed) the threshold

Once registered, you'll receive a VAT registration certificate showing your VAT number. You can usually start using this number to charge VAT straight away, even before the certificate arrives.

What happens if you register late?

Late registration is taken seriously by HMRC. If you should have registered but didn't, you'll face:

• Back payment of VAT — you'll owe VAT on all sales made since the date you should have registered. This comes from your own pocket if you can't retrospectively charge customers.
• Late registration penalty — HMRC charges a penalty of 5% of the VAT owed if you're up to 9 months late, increasing to 10% for 9–18 months late, and 15% for more than 18 months late. The minimum penalty is £50.
• Interest charges — HMRC charges interest on late payments.

If you've realised you've missed the registration deadline, the best approach is to come forward to HMRC voluntarily. The penalty for disclosure is generally lower than if HMRC discovers the issue through an investigation.

What to do after registering

Once you're VAT registered, your key obligations are:

• Charge VAT on all taxable supplies at the correct rate
• Issue VAT invoices to VAT-registered customers
• Submit quarterly VAT returns via Making Tax Digital-compatible software
• Pay any VAT owed to HMRC by the deadline (usually one month and seven days after your VAT period ends)
• Keep digital VAT records under MTD rules

Also read our guides on VAT return deadlines and Making Tax Digital for VAT to stay compliant from day one.