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Where the threshold sits right now
You must register for VAT once your VAT taxable turnover goes over £90,000. That figure has been in place since 1 April 2024 and it did not move at the last Budget. The deregistration threshold is £88,000.
The part that catches people out is not the number, it is the test. It is a rolling 12 month total, not your accounting year and not the tax year. At the end of every month you look back over the previous 12 months. If that running total has gone over £90,000 you have crossed it, even if your year end is months away and even if you were nowhere near it last quarter.
There is a second test that catches people faster. If you expect to go over £90,000 in the next 30 days alone, you must register immediately. That one bites when a single large contract lands. You do not get to wait and see.
The deadlines, and what happens if you miss them
Under the backward look you have 30 days from the end of the month in which you crossed the threshold to tell HMRC, and your registration starts from the first day of the second month after you went over. Under the forward look you register within 30 days and registration starts from the date you realised.
Miss it and the problem is not the penalty. HMRC will backdate your registration to the date you should have registered, and you will owe VAT on everything you sold from that date. Your customers are long gone. Unless your contracts let you go back and charge VAT on top, it comes out of your own pocket, and across a year of missed registration that can be a five figure sum on a business that never had the cash.
Whether to register before you have to
This is where generic advice falls down, because the right answer depends entirely on who your customers are.
If you sell mainly to VAT registered businesses, registering early often costs you nothing. Your customers reclaim the VAT you charge, so your effective price to them is unchanged, and you start reclaiming VAT on your own costs. If you have real equipment, stock or software spend, voluntary registration can put money back.
If you sell mainly to consumers, it is the opposite. Your customer cannot reclaim anything. Adding 20% either makes you 20% dearer overnight or takes 20% off your margin. This is the genuine cliff edge: a business turning over £89,000 to consumers can be better off than the same business at £95,000, because VAT applies to all of it, not just the excess.
If you are approaching the threshold
Check the rolling total monthly. Not annually, not at year end. A spreadsheet column that sums the last 12 months is enough, and it is the single most useful thing a growing business can do about VAT.
If you are close, look at the schemes before you register rather than after. The Flat Rate Scheme can suit businesses with few costs. Cash accounting means you do not pay VAT over until your customer has actually paid you, which matters with slow payers. Annual accounting cuts the admin to one return. These are worth deciding deliberately at the point of registration.
Be careful about the tempting fix of splitting the business in two to stay under. HMRC has specific rules on artificial separation and can direct that the parts be treated as one. If the two businesses share customers, premises, staff or bank accounts, it will not hold.
Common questions
Does the threshold include everything I invoice?
It is your VAT taxable turnover: everything you sell that is not exempt or outside the scope. Zero rated sales still count towards it, which surprises people, because 0% is still a VAT rate. Exempt supplies do not count.
I went over for one month because of a one off job. Must I still register?
Possibly not. If you go over temporarily you can apply for an exception from registration, but you have to ask HMRC and show that your turnover for the next 12 months will be below the £88,000 deregistration threshold. It is not automatic, and you should ask at the time rather than later.
Can I deregister if I drop below?
Yes, once turnover falls below £88,000 you can apply. Think it through first, because you may have to account for VAT on stock and assets you still hold if you reclaimed VAT on them.
Figures here are correct for 2026/27 and checked against current HMRC guidance. This is general information, not advice on your own position. If you are near the threshold and want to know what it means for your business, get in touch.