The UK VAT registration threshold in 2026 is £90,000 of taxable turnover in any rolling 12-month period, per HMRC (raised from £85,000 in April 2024). Once your taxable turnover exceeds this figure — or you reasonably expect it to within the next 30 days — you are legally required to register for VAT.
How is the VAT registration threshold calculated?
The threshold is measured against taxable turnover in any rolling 12-month period — not the tax year, not your financial year, and not a calendar year. This means you must check it continuously: at the end of each month, look back at the preceding 12 months and total your taxable supplies.
Most businesses learn about the threshold in the context of their annual accounts, but that is too slow a check. A business with strong seasonal revenue — a summer-heavy retailer, a December-heavy services firm — can cross the threshold midway through a financial year without realising it until the accounts are prepared months later. At that point, the registration deadline has already passed, and HMRC's late registration penalties apply from the date you should have registered.
The deregistration threshold is £88,000 per HMRC — slightly lower than the registration threshold. If your taxable turnover drops below £88,000 on an expected forward-looking basis, you can apply to deregister. You cannot deregister simply because you dropped below £90,000 retrospectively; the test is whether you expect turnover to stay below £88,000 in the next 12 months.
What counts towards the VAT registration threshold?
Not all business income counts towards the VAT threshold — the figure that matters is taxable turnover, which includes standard-rated supplies (20%), reduced-rated supplies (5%), and zero-rated supplies (0%). This surprises many businesses: zero-rated supplies count towards the threshold even though no VAT is actually charged on them.
What does not count: exempt supplies (insurance, most financial services, most residential property rental, and education from eligible bodies), income that is not a business supply at all (grants, dividends, salary), and in most cases the sale of capital assets (such as equipment or vehicles) that the business itself owned and used. HMRC's guidance on capital asset sales is nuanced — if you are regularly buying and selling assets as part of your trade, those sales may count.
Counts towards the threshold
- · Standard-rated sales (20% VAT)
- · Reduced-rated sales (5% VAT)
- · Zero-rated sales (0% VAT — e.g. most food, children's clothing)
- · Exports of goods and services (zero-rated but taxable)
- · Distance sales into the UK from overseas
Does NOT count towards the threshold
- · Exempt supplies (insurance, finance, residential lettings)
- · Outside-the-scope income (grants, pure salary)
- · Capital asset disposals (usually)
- · Dividends received
- · Non-business income (donations to charities, club membership)
What is the difference between zero-rated and VAT-exempt?
This is one of the most practically important VAT distinctions, and it catches many businesses off-guard. Zero-rated means VAT is charged at 0% — the supply is technically a taxable supply, just at a nil rate. Exempt means the supply is outside the VAT system altogether. The threshold impact is completely different: zero-rated counts, exempt does not.
A food manufacturer selling zero-rated groceries with turnover of £95,000 must register for VAT. A firm receiving only exempt insurance commissions with £500,000 of income need not register. In practice, many businesses have a mix — a children's clothing retailer (zero-rated goods) that also charges for alterations (standard-rated) needs to track both streams carefully.
| Supply type | VAT rate | Counts to threshold? | Examples |
|---|
| Standard-rated | 20% | Yes | Most goods and services, professional fees |
| Reduced-rated | 5% | Yes | Domestic energy, children's car seats, smoking cessation products |
| Zero-rated | 0% | Yes | Most food, children's clothing, books, exports |
| Exempt | n/a | No | Insurance, most financial services, most residential lettings, private education |
| Outside scope | n/a | No | Grants, dividends, salary, statutory fees |
When does HMRC enforce the VAT threshold?
Two different trigger rules apply, per HMRC, depending on whether you have already exceeded the threshold or expect to exceed it imminently.
The historic test: if at the end of any month you find that your taxable turnover in the preceding 12 months has exceeded £90,000, you must register within 30 days of the end of that month. Your effective date of registration — the date from which you must charge VAT — is the first day of the second month after the month in which you exceeded the threshold. For example: if you exceed £90,000 in the 12 months to 31 July, you must register by 30 August, and your effective date is 1 September.
The future test: if at any point you reasonably expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately — there is no 30-day grace period. Your effective date of registration is the start of the 30-day period during which you expect to exceed the threshold. This most commonly applies when a business signs a large contract or receives a significant advance payment.
Has the VAT threshold always been £90,000?
No. The current £90,000 threshold has been in force since 1 April 2024, per HMRC. Before that, the threshold was £85,000, a figure that had been frozen since April 2017 — a seven-year freeze that meant inflation progressively eroded its real value and drew more small businesses into mandatory registration over time.
At £85,000 for seven years, the UK threshold fell significantly in real terms against the rate of inflation over that period. The £5,000 increase to £90,000 in April 2024 was the first upward movement since 2017, though it remains below where the threshold would have been had it tracked CPI from 2017. There is no commitment to further increases — the threshold is set by statutory instrument and can be changed in any Budget.
For step-by-step guidance on the registration process itself, see the how to register for VAT in the UK guide. For accounting and tax support, RR Accountants is the Rajoka portfolio brand, and the accounting and tax resources hub has further guidance.
Frequently asked questions
Is the VAT threshold £90,000 or £85,000 in 2026?
The UK VAT registration threshold is £90,000 in 2026, per HMRC. It was raised from £85,000 on 1 April 2024. The £85,000 figure had been frozen since April 2017. The deregistration threshold is £88,000 — two thousand pounds below the registration threshold.
Does the VAT threshold apply per business or per person?
Per legal entity. If you operate multiple separate limited companies, each company has its own threshold against its own taxable turnover. If you operate multiple trading names under a single limited company, all their turnover is combined against one threshold. HMRC can also treat separately incorporated businesses as a single entity if they are artificially separated to avoid VAT — this is known as disaggregation.
What happens if I miss the VAT registration deadline?
Per HMRC, late registration triggers a penalty calculated as a percentage of the VAT that should have been paid from the date you should have registered. Rates range from 5% for delays under 9 months to 15% for delays over 18 months. You also become liable for the VAT on all sales from the date you should have registered, even if you did not charge it at the time.
Do exports count towards the VAT registration threshold?
Yes. Exports of goods and services are zero-rated (VAT charged at 0%), which means they are taxable supplies and count towards the £90,000 threshold. However, purely outside-the-scope supplies — such as goods sold outside the UK where the place of supply rules mean UK VAT does not apply — may not count. The rules vary depending on the nature of the goods or services.
Can I avoid VAT registration by splitting my business?
Deliberately splitting a business into separate entities to keep each below the VAT threshold — known as disaggregation — is illegal tax avoidance under HMRC rules. HMRC can treat artificially disaggregated businesses as one entity, register them compulsorily, and apply penalties. Each separation must have a genuine commercial reason independent of the VAT benefit.