VAT · Registration

The VAT registration threshold

£90,000 of turnover in any rolling 12 months and registration stops being optional. The catch: most sole traders are watching the wrong 12 months.

The rule, precisely

You must register for VAT when your VAT-taxable turnover passes £90,000 in any rolling 12-month period — or when you expect it to pass £90,000 in the next 30 days alone.

“Rolling” is the word that catches people. It is not the tax year, not the calendar year, and not your accounting year. At the end of every month, you look back over the previous 12 months. If that total has crossed £90,000, the clock starts: you have 30 days to register, and your registration takes effect from the first day of the second month after you crossed.

The busy-spell trap

A quiet trader doing £6,000 a month is comfortably under the line at £72,000 a year. Then a big contract lands: three months at £15,000. The rolling total quietly passes £90,000 mid-year — while the trader is still thinking “I'm nowhere near £90k for the tax year.” HMRC backdates the registration to when you should have registered, and you owe the VAT on everything since — usually out of your own pocket, because you never charged it to clients.

What counts as VAT-taxable turnover

Sales of your labour and services

Materials you bill to clients

Zero-rated sales (they're still taxable at 0%)

Money from selling business equipment

Income from employment (PAYE)

VAT-exempt income (e.g. most residential rent)

What registration actually means day to day

Once registered you charge 20% VAT on top of your prices (for most trades), file VAT returns through Making Tax Digital software, and can reclaim the VAT on your business purchases. For trades serving VAT-registered businesses, that's often neutral or even positive — your clients reclaim what you charge. For trades serving the public — hairdressers, decorators, personal trainers — it usually means either raising prices 20% or absorbing the hit.

That cliff is why many sole traders deliberately manage their turnover near the line. If that's you, you need to know your rolling number every month, not at year end.

Voluntary registration — sometimes worth it

You can register before you hit the threshold. It makes sense when your clients are mostly VAT-registered businesses (they don't care about the 20%, and you reclaim VAT on your tools, fuel and materials) — and it can make a small business look bigger. It rarely makes sense when your customers are the public.

Deregistering

If your turnover falls below £88,000 (the deregistration threshold) you can ask HMRC to cancel your registration. The £2,000 gap between the two thresholds stops businesses bouncing on and off the register.

Staying on the right side of it

1
Check your rolling 12-month total monthly, not annually — the threshold test runs at the end of every month.
2
If a big contract is coming, run the numbers before you sign: crossing £90,000 mid-job changes what you keep.
3
Don't forget the 30-day forward test — a single huge order that will exceed £90,000 on its own triggers immediate registration.
4
If you've already crossed and missed it, register now and talk to an accountant — penalties scale with how late you are, and coming forward beats being found.
5
If you're approaching the line deliberately, get advice on the Flat Rate Scheme — for some trades it simplifies VAT dramatically.

Know your rolling turnover without a spreadsheet

Get Sorted tracks your income continuously and warns you when you're approaching the VAT threshold — months before it becomes a legal deadline.

Try Get Sorted free →

HMRC sources

gov.uk — Register for VAT gov.uk — When to register for VAT

Always verify current thresholds and rates directly with HMRC or a qualified accountant.