When do I need to register for VAT? (UK 2025)

The £90,000 threshold

The UK VAT registration threshold was raised from £85,000 to £90,000 on 1 April 2024 — the first increase since 2017. It applies to VAT-taxable turnover, which is all your sales of goods and services excluding:

• VAT-exempt sales (insurance, finance, education, some property)
• Sales outside the scope of VAT (some grants, salary you receive)
• Sales of capital assets (selling your old van isn't turnover)

The 12-month rolling rule (the catch)

Most founders think VAT registration is based on annual turnover. It isn't — it's based on any rolling 12-month period. If your turnover in any 12 consecutive months exceeds £90k, you must register. Worked example:

• Year-to-date turnover Jan–Sep: £65,000 — under threshold.
• You sign a £30k contract that bills in October.
• Your 12-month rolling turnover at end of October = £85,000 (Nov last year onwards) + £30k = ~£95k.
• You've crossed the threshold mid-month. Register within 30 days.

Failing to register on time means HMRC backdates your registration and charges you VAT on all sales since the crossing date — but you can't now collect that VAT from customers because the invoices are gone. You eat the cost.

The 1-month future-look rule

There's also a forward-looking trigger: if you reasonably expect your turnover in the next 30 days alone to exceed £90k, you must register immediately. This rarely fires — it catches things like a single huge contract signing.

Voluntary registration — when it makes sense

You can register below threshold. Voluntary registration is worth it when:

• Your customers are VAT-registered businesses. They reclaim VAT, so charging them doesn't change their cost. Meanwhile, you reclaim VAT on your own purchases.
• You spend heavily on VAT-bearing inputs. Big software bills, equipment purchases, professional services — all reclaimable input VAT you currently can't recover.
• You want to look established. A VAT number on your invoices signals maturity. Not a great reason on its own.

When voluntary registration is a bad idea

• B2C — your customers are consumers. They can't reclaim. Adding 20% VAT to your prices makes you 20% more expensive overnight (or hurts your margin if you absorb it).
• Your suppliers aren't VAT-registered. You can't reclaim VAT you didn't pay, but you still have to charge it out.
• You hate admin and aren't paying enough VAT-bearing costs to make quarterly returns worth the time.

Deregistration

If your turnover drops below £88,000 (the deregistration threshold — slightly below the registration one), you can apply to deregister. You don't have to. Many businesses with cyclical revenue stay registered through quiet periods.

How registration actually works

1. Apply online via your HMRC Government Gateway (most common) or paper form VAT1.
2. You'll need: your business details, expected turnover, VAT scheme choice (cash or accrual — see our guide).
3. HMRC issues a VAT number within 30 days (often within 2 weeks).
4. Your effective date of registration is when you crossed the threshold OR the date you applied (for voluntary). From that date, you must charge VAT on all taxable sales.
5. First VAT return covers the period from your effective date to the end of your assigned quarter — could be 1-4 months long.

Common mistakes

• Watching annual turnover, not rolling 12-month. Easy to be 3 months past the threshold before you notice.
• Not adjusting prices when registering. If you forget, you've just given HMRC 1/6 of every sale from your margin.
• Voluntary registration for prestige. Adds quarterly admin for minimal benefit if your customers are consumers.
• Not joining the Cash Accounting Scheme at registration if eligible. Default is accrual; cash usually better for early-stage businesses.