When Must I Register for VAT, and What Are the New Thresholds?
If you’re running a business in the UK — whether as a sole trader, partnership or limited company — understanding your obligations around VAT (Value Added Tax) is essential. Not only are the rules around VAT registration strict, but recent updates from HMRC mean new thresholds are now in effect.
So, when must you register for VAT? What are the current limits? And should you register voluntarily even if you don’t have to?
This guide answers all those questions and more — with the most up-to-date guidance for the 2025/26 tax year.
What Is VAT and Who Does It Apply To?
Value Added Tax (VAT) is a tax applied to most goods and services sold in the UK. If you run a business and make sales that are subject to VAT — either at the standard rate (20%), reduced rate (5%) or zero rate (0%) — you may be required to register with HMRC, charge VAT on your sales, and submit VAT returns.
Once registered:
- You charge VAT to your customers
- You reclaim VAT on your business purchases (input VAT)
- You file VAT returns (usually every quarter)
- You pay the net VAT to HMRC (or claim a refund if your input VAT exceeds output VAT)
But before any of that applies, the key question is:
When Must I Register for VAT?
You must register for VAT if either of the following applies:
1. Your taxable turnover exceeds the VAT registration threshold over any rolling 12-month period
This isn’t a fixed calendar year — it’s a moving window. So, if your business income from VATable sales exceeds the registration threshold in any 12-month span, you must register.
Example:
If you earned £7,500 per month from April 2024 to March 2025, your total taxable turnover is £90,000 — you’ve hit the threshold.
2. You expect your taxable turnover to exceed the threshold in the next 30 days alone
This rule applies when you suddenly land a large contract or sales spike. If you know your sales will go over the limit in a single month, you must notify HMRC within 30 days.
Example:
You secure a £100,000 deal for delivery next month. Even if you haven’t gone over the threshold in the past 12 months, the 30-day rule kicks in.
What Is the New VAT Registration Threshold in 2025?
On 1 April 2024, the UK government increased the VAT registration threshold for the first time in years.
The thresholds for 2025/26 are:
- VAT Registration Threshold: £90,000 (previously £85,000)
- VAT Deregistration Threshold: £88,000 (previously £83,000)
These apply to all VAT-taxable sales (standard, reduced and zero-rated) and are not pro-rated — meaning even part-year businesses must register once they go over the threshold.
How Long Do I Have to Register Once I Hit the Threshold?
If your taxable turnover goes over £90,000, you must register within 30 days of the end of the month in which it happened.
Example:
You exceeded £90,000 on 20 July 2025. You must register by 31 August 2025.
Failing to register on time can result in:
- Backdated VAT liabilities (even if you didn’t charge VAT)
- Interest on late VAT payments
- HMRC penalties for late registration
Can I Register for VAT Voluntarily?
Yes — even if your turnover is below the threshold, you can opt to register voluntarily. Many businesses do this for strategic reasons:
Benefits of voluntary VAT registration:
- Reclaim VAT on start-up and ongoing business expenses
- Look more established when dealing with larger clients
- Avoid registration delays when your business scales up
However, once registered, you must:
- Charge VAT on all your taxable sales
- Submit regular VAT returns
- Maintain digital records under Making Tax Digital (MTD)
So while it can provide financial benefits, it also brings administrative responsibilities.
What Is Taxable Turnover?
Taxable turnover is the total value of everything you sell that isn’t exempt from VAT.
Includes:
- Standard-rated goods and services (20%)
- Reduced-rate goods and services (5%)
- Zero-rated goods and services (0%)
Excludes:
- Exempt sales (e.g., insurance, education, residential rent)
- Outside-the-scope income (e.g., non-UK sales)
- Non-business income (e.g., personal gifts, loans)
You must track taxable turnover monthly to avoid breaching the threshold without realising.
When Can I Deregister from VAT?
You can apply to cancel your VAT registration if your taxable turnover falls below the £88,000 deregistration threshold.
This might happen if:
- Your income drops due to market changes
- You scale back operations
- You switch from standard-rated to exempt services
Deregistration Considerations:
- You’ll stop charging VAT
- You’ll lose the ability to reclaim input VAT
- If you still own assets or stock with a VAT value of £1,000+, you may need to pay VAT on them
What Are the Penalties for Not Registering on Time?
Failing to register for VAT when required can be costly.
HMRC will:
- Backdate your VAT registration to when you should have registered
- Expect VAT on all sales from that date — even if you didn’t charge it
- Charge interest and penalties
Penalties depend on how late you are and whether HMRC views it as careless or deliberate.
To avoid this:
- Track your turnover monthly
- Set up accounting software to flag when you approach the threshold
- Get professional support if you’re unsure
Preparing for VAT Compliance
Once registered, you’ll need to:
- Submit quarterly VAT returns
- Use Making Tax Digital (MTD) compatible software
- Keep digital VAT records
- Pay HMRC the net VAT owed (or claim a refund if input VAT is higher)
The deadline for most VAT returns and payments is one calendar month and seven days after the end of the VAT quarter.
Example:
For the quarter ending 30 June, your return and payment are due by 7 August.
Future Threshold Changes?
At the time of writing, there has been speculation about a further threshold increase or decrease from 6 April 2026, depending on economic policy.
Businesses should prepare for:
- Possible adjustment to the VAT registration limit
- Continued expansion of MTD for Income Tax
- Potential alignment of VAT rules with digital reporting changes
How Merranti Accounting Can Help
VAT registration and compliance can feel overwhelming, especially if you’re a start-up or growing business.
At Merranti Accounting, we help clients with:
- Monitoring turnover to stay under or register on time
- Assessing the pros and cons of voluntary VAT registration
- Registering for VAT and HMRC correspondence
- Submitting VAT returns under Making Tax Digital
- Dealing with deregistration or scheme changes (e.g. Flat Rate Scheme)
Conclusion
If your taxable turnover exceeds £90,000, you must register for VAT within 30 days. With the new threshold in effect since April 2024, it’s crucial that all business owners — especially those nearing the limit — take time to review their turnover figures monthly.
And even if you’re below the threshold, voluntary VAT registration could still benefit you financially — but it’s essential to understand the responsibilities it brings.
