What is the current VAT threshold in the UK?

Learn the current VAT registration threshold in the UK, when you must register for VAT, and what happens if your business goes over the limit or chooses to register voluntarily.

VAT (Value Added Tax) is a tax applied to most goods and services sold in the UK. If you run a business, one of the most important things to understand is when you need to register for VAT. HMRC sets a turnover threshold that determines when registration becomes compulsory. Once your taxable income passes this limit, you must register and start charging VAT on your sales.

This article explains the current VAT threshold, how it is calculated, and what your options are if your turnover is close to or above the limit.

The current VAT registration threshold

As of April 2025, the VAT registration threshold in the UK is £90,000. This means that if your taxable turnover (the total value of all goods and services you sell that are subject to VAT) exceeds £90,000 in any rolling 12-month period, you must register your business for VAT with HMRC.

This threshold applies to most businesses, whether you are a sole trader, partnership, or limited company. It includes both standard-rated and zero-rated sales but does not include VAT-exempt income, such as rent from residential properties or financial services.

The deregistration threshold

The VAT deregistration threshold is slightly lower, at £88,000. If your taxable turnover falls below this figure, you can choose to deregister from VAT. This can be useful if your sales drop or your business activity changes and you no longer need to charge VAT.

However, you must inform HMRC if you wish to deregister, and you may need to account for VAT on certain assets or stock at the point of deregistration.

What counts towards the VAT threshold

Your taxable turnover is the total value of everything you sell that is not exempt from VAT. It includes:

  • Standard-rated sales (currently 20%).

  • Reduced-rated sales (5%).

  • Zero-rated sales (0%).

It does not include:

  • VAT-exempt sales, such as residential rent or some medical and financial services.

  • Income from outside the scope of UK VAT, such as certain overseas sales.

  • Money received from grants or loans.

You must check your turnover regularly because the VAT threshold applies to a rolling 12-month period, not a calendar or tax year.

For example, if your turnover from May 2024 to April 2025 exceeds £90,000, you must register, even if your turnover was lower in previous financial years.

When you must register for VAT

You must register for VAT if either of the following applies:

  1. Your taxable turnover in the last 12 months has gone over £90,000.

  2. You expect your turnover to go over £90,000 in the next 30 days alone (for example, due to a large contract).

If your business meets either condition, you must register within 30 days of the end of the month in which your turnover exceeded the threshold.

Failing to register on time can result in:

  • Paying VAT backdated to when you should have registered.

  • Interest on unpaid VAT.

  • HMRC penalties.

Once registered, you must charge VAT on your taxable sales, submit VAT returns (usually every quarter), and keep digital records under the Making Tax Digital rules.

Voluntary VAT registration

If your turnover is below £90,000, you can choose to register voluntarily. This can be beneficial in some cases, particularly if:

  • Most of your customers are VAT-registered and can reclaim VAT on your invoices.

  • You incur significant VAT on business expenses and want to reclaim it.

  • You wish to appear more established or credible to larger clients.

However, voluntary registration also means extra administrative responsibilities, such as filing VAT returns and maintaining digital records. It can also make your prices appear higher to customers who are not VAT registered, such as members of the public.

Monitoring your turnover

Because the threshold applies to a rolling 12-month period, it’s important to track your turnover monthly rather than waiting until year-end.

For example:

  • In March, your turnover for the last 12 months is £85,000.

  • In April, you earn £7,000 more, bringing your 12-month total to £92,000.

  • You must register by the end of May and begin charging VAT from 1 June.

Many businesses use accounting software such as Xero or QuickBooks to monitor turnover automatically and alert them when they are close to the VAT limit.

Temporary spikes in turnover

If you exceed the threshold temporarily due to an unusual event—such as a one-off large sale—you can ask HMRC for an exception from registration. You will need to provide evidence that your future turnover will fall back below £90,000 within the next 12 months.

HMRC reviews each case individually. If accepted, you will not need to register, but if rejected, you must complete VAT registration as normal.

What happens after registration

Once you are VAT registered, you will:

  • Receive a VAT registration number from HMRC.

  • Charge VAT on your sales (output tax).

  • Reclaim VAT on your business expenses (input tax).

  • Submit VAT returns, usually every quarter.

You will also need to include VAT registration details on all invoices and business documents.

Depending on your turnover and type of business, you may choose to join a specific VAT accounting scheme such as:

  • The Flat Rate Scheme (simplifies VAT reporting for small businesses).

  • The Cash Accounting Scheme (you pay VAT only when customers pay you).

  • The Annual Accounting Scheme (file one VAT return per year with instalments).

These schemes can help manage cash flow and reduce administrative work.

Failing to register on time

If you miss the registration deadline, HMRC can issue a backdated VAT bill for the period you should have been registered. You will also need to pay:

  • Any VAT that should have been charged to customers (even if you did not collect it).

  • Interest on the unpaid VAT.

  • A penalty, which depends on how late you were and whether the mistake was deliberate or accidental.

To minimise penalties, it is best to notify HMRC as soon as you realise you should have registered.

VAT deregistration

If your taxable turnover drops below £88,000, you can apply to deregister from VAT. You may also be required to deregister if you stop trading or cease making taxable supplies.

When deregistering, you must submit a final VAT return and account for VAT on stock or assets that have reclaimable VAT.

The bottom line

The current VAT registration threshold in the UK is £90,000, and it applies to the total taxable turnover of your business over any rolling 12-month period. If you exceed this limit, you must register with HMRC within 30 days and begin charging VAT on your sales.

Even if your turnover is below the threshold, voluntary registration may still be beneficial if you have significant VAT costs or work mainly with other VAT-registered businesses.

Keeping a close eye on your turnover, maintaining accurate records, and seeking professional advice when needed will help you stay compliant, avoid penalties, and make informed decisions about VAT registration.