The VAT registration threshold explained (2026/27)

VAT registration is one of the first “am I doing this right?” moments for a growing freelancer or small business. Get the timing wrong and you can end up owing VAT you never charged. This guide explains the threshold, the two tests that trigger registration, and what actually changes once you’re in the system.

The number: £90,000

For the 2026/27 tax year the VAT registration threshold is £90,000. This is your VAT-taxable turnover — the total of everything you sell that isn’t VAT-exempt — not your profit. It’s the top-line figure before costs.

Two important points people miss:

• It is a rolling 12-month figure, not your accounting year or the tax year. At the end of every month you look back over the previous 12 months.
• It counts standard, reduced and zero-rated sales, because those are all “taxable” supplies. Only genuinely exempt income (for example some financial services, insurance or health services) is left out.

The two tests that trigger registration

You must register if either of these is true:

1. The backward-looking test. At the end of any month, your VAT-taxable turnover for the previous 12 months has gone over £90,000. You must register within 30 days of the end of that month, and your registration takes effect from the first day of the second month after you went over.
2. The forward-looking test. At any point you expect your VAT-taxable turnover to go over £90,000 in the next 30 days alone. This catches one-off spikes — a single large contract can trigger it. Here you must register by the end of that 30-day period, and registration is effective from the date you realised.

The forward test is the one that surprises people: it isn’t about the rolling year at all. If you win a single £100,000 project starting next week, you may need to register straight away.

Registering voluntarily (and why you might)

You can register before you hit £90,000, and for many B2B freelancers it makes sense:

• If most of your clients are VAT-registered businesses, they reclaim the VAT you charge, so adding 20% doesn’t really cost them — and you get to reclaim VAT on your own costs (software, equipment, subscriptions).
• It can make a small business look more established.

Voluntary registration is usually a bad idea if you sell mainly to consumers or non-registered businesses, because your prices effectively jump 20% or your margin takes the hit.

What changes once you’re registered

• You must add VAT to your standard-rated sales — normally at the standard rate of 20% (some things are 5% or 0%). Our VAT calculator does the add/remove maths instantly.
• You must show VAT correctly on your invoices, keep digital records, and file returns under Making Tax Digital, usually quarterly.
• You can reclaim VAT on eligible business purchases.
• You should consider whether a scheme suits you — the Flat Rate Scheme (a single percentage of gross turnover, simpler record-keeping) or the Cash Accounting Scheme (account for VAT when you’re paid, not when you invoice) can help cash flow.

Deregistration

If your VAT-taxable turnover falls — or you expect it to fall — below the deregistration threshold of £88,000, you can apply to cancel your registration. You’d typically do this if you’ve scaled back or your client mix has changed.

Common mistakes to avoid

• Watching your bank balance instead of a rolling 12-month total. Set a reminder to check the trailing year at each month-end as you approach £70k–£80k.
• Forgetting the 30-day forward test when a big contract lands.
• Including exempt income in the total, or excluding zero-rated sales — zero-rated still counts towards the threshold.
• Registering late. HMRC can charge you the VAT you should have collected from your effective registration date, even if you never added it to invoices.

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This guide is information, not tax advice, and uses published HMRC rates for 2026/27. Thresholds and rules change — check the current position at gov.uk/register-for-vat or speak to an accountant before acting.

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