"Do I need to register for VAT yet?" is one of the most common questions small businesses ask their accountant. Here's how the VAT registration threshold actually works — and the trap that catches people out.

What is the VAT registration threshold?

You must register for VAT if your VAT-taxable turnover goes over the £90,000 threshold (the figure since April 2024). There are two ways you can cross it:

  • The rolling 12-month test — if your taxable turnover over any rolling 12-month period exceeds £90,000. This is not your accounting year or the tax year; it's the last 12 months at any point in time.
  • The 30-day future test — if you expect your taxable turnover to exceed £90,000 in the next 30 days alone (for example, you win a large one-off contract).

The deregistration threshold is £88,000 — if your turnover drops below that, you can apply to leave.

The rolling-12-months trap

Because it's a rolling test, you have to watch your turnover every month, not just at year-end. It's easy to sail past £90,000 in, say, a busy November without noticing until the accounts are done months later — by which point you're late, and HMRC can charge penalties and backdate the VAT you should have collected.

Registering — and voluntary registration

Once you must register, you have 30 days from the end of the month you went over to tell HMRC. You then charge VAT on your sales and reclaim VAT on your costs.

Some businesses register voluntarily below the threshold — usually because most of their customers are VAT-registered (so the VAT doesn't cost them) and it lets the business reclaim input VAT and look more established. Others avoid it to stay cheaper for consumers. It's a judgement call worth taking with an accountant.

Making Tax Digital applies from day one

The moment you're VAT-registered, Making Tax Digital for VAT applies: you must keep digital records and file your VAT returns from MTD-compatible software, with no manual retyping between your records and the return. If you're approaching the threshold, getting your bookkeeping digital before you register makes the switch a non-event — see our guide to what counts as a digital record.

Stay ahead of the threshold

BookEnu keeps a client's turnover and VAT position current as documents come in, so crossing the threshold is spotted early rather than at year-end — and the 9-box VAT return is produced from digital records for standard, cash-accounting and flat-rate schemes. Apply for early access to try it.

General information, not tax advice. VAT thresholds and rules change — check current HMRC guidance for your situation.