VAT registration threshold UK 2026: when you need to register

The VAT registration threshold for 2026-27 is £90,000 of taxable turnover over the previous 12 months, or £90,000 in the next 30 days alone. Taxable turnover includes all supplies of goods and services that attract VAT, excluding VAT itself. If your turnover exceeds £90,000, you must register for VAT within 30 days of the end of the month in which you crossed the threshold. You can also register voluntarily before reaching the threshold if it makes commercial sense. The threshold rose from £85,000 to £90,000 on 1 April 2024, and it stayed at £90,000 for 2026-27.

Mandatory registration is required when turnover exceeds £90,000. Voluntary registration can be beneficial in several scenarios: if you mostly sell to VAT-registered businesses who can reclaim the VAT (making your prices effectively unchanged for them); if you incur significant VAT on purchases that you can reclaim; if you want to appear more established to large corporate clients; or if you are in the construction industry where VAT registration is often expected. However, voluntary registration is not always advantageous: if most of your customers are members of the public (who cannot reclaim VAT), adding 20% to your prices could make you uncompetitive. Carefully model the impact on your pricing and cash flow before registering voluntarily.

The VAT Flat Rate Scheme simplifies VAT record-keeping for small businesses with turnover up to £150,000 (excluding VAT). Instead of calculating VAT on each sale and purchase separately, you pay a fixed percentage of your turnover to HMRC and keep the difference. The percentage depends on your business type and is applied to your VAT-inclusive turnover: for example 14% for management consultancy, 14.5% for computer and IT consultancy and for accountancy, and 7.5% for retailing not listed elsewhere. If you spend very little on goods, you count as a 'limited cost trader' and pay 16.5% whatever your sector, which often removes most of the benefit. The scheme can suit businesses with low costs that are not limited cost traders, but you generally cannot reclaim VAT on purchases (except some capital assets over £2,000). Check the current rates on GOV.UK and compare the flat rate with standard VAT accounting using your own figures before you join.