Few things cause more quiet anxiety for a growing business than VAT. Everyone knows there is a threshold. Far fewer people know exactly how it is measured, and HMRC does not send you a reminder when you cross it. This guide sets out the rules as they stand for 2026/27, in plain English.

The rule in one sentence

You must register for VAT when your taxable turnover in any rolling 12-month period goes over £90,000, or when you expect it to go over £90,000 in the next 30 days alone.

Two words in that sentence do most of the work, so let us take them in turn.

"Taxable turnover" is not the same as your sales

Taxable turnover means the total value of everything you sell that is not exempt from VAT. That includes standard-rated sales, reduced-rated sales and, importantly, zero-rated sales such as most food, books and children's clothing. Zero-rated still counts towards the threshold even though no VAT is charged on it.

What does not count: genuinely exempt supplies (certain financial services, insurance, some education and health services, most residential lettings) and income that is outside the scope of VAT altogether. HMRC publishes the full list of VAT rates on different goods and services, including everything that is exempt, and its guidance on what to include when calculating your turnover. If you are still unsure which category your sales fall into, that question alone is worth a conversation with an accountant, because getting it wrong in either direction is expensive.

"Rolling 12 months" is the bit that catches people

The threshold is not measured against your accounting year, your tax year or the calendar year. It is measured against the last 12 months, ending on any given day. At the end of every month you should be asking: what did I sell in the 12 months up to today?

This is why businesses with a strong seasonal peak often cross the line without noticing. A busy November and December can push a rolling total over £90,000 even if no single financial year does.

The other trigger: the 30-day forward test If you win a single contract, or have a burst of orders, that means you expect to exceed £90,000 in the next 30 days on its own, you must register immediately, from the date you realised. This one is rare, but it does happen to businesses landing a first large client.

What about sales overseas?

Selling abroad changes the picture, and not always in the direction people expect.

  • Goods you export outside the UK are normally zero-rated: you charge no VAT, but the sales still count towards your £90,000 taxable turnover, because zero-rated is a taxable rate.
  • Services you sell to overseas businesses are usually outside the scope of UK VAT under the place of supply rules, so they generally do not count towards the threshold. A UK consultant whose clients are all companies abroad may have a large turnover and no UK VAT obligation at all.
  • Services you sell to overseas consumers depend on the type of service. Some count, some do not, and digital services have their own regime.

The trap almost nobody sees coming: if you buy services from overseas suppliers, such as software subscriptions, advertising or freelancers based abroad, the value of those "reverse charge" services counts towards your registration threshold as though they were your own sales. A business that sells only to UK consumers can still be pushed over £90,000 by what it buys from abroad. Cross-border VAT is one of the genuinely complicated corners of the tax system; if any of the above applies to you, it is worth getting advice before rather than after.

What to do once you have crossed it

You have 30 days from the end of the month in which you went over the threshold to register with HMRC. Your registration takes effect from the first day of the second month after you crossed the line. For example, if your rolling turnover passed £90,000 on 15 March, you must register by 30 April, and you are VAT-registered from 1 May.

From that date you must charge VAT on your taxable sales, keep digital records, and submit returns using Making Tax Digital compatible software such as Xero. Returns and payment are normally due one month and seven days after the end of each quarter.

What happens if you register late

Two things, and neither is pleasant. First, HMRC will still treat you as registered from the date you should have been, which means you owe the VAT on every sale since then, whether or not you charged it to your customers. Second, there is a penalty for late registration, calculated as a percentage of the VAT due and rising the longer the delay.

If you have just discovered you crossed the threshold months ago, do not sit on it. Coming forward voluntarily is treated far more gently than being found out.

Coming back under the threshold

If your taxable turnover falls, you can apply to deregister once you can show it will be below £88,000 over the next 12 months. The deregistration figure is deliberately a little lower than the registration one, so businesses hovering near the line do not flip in and out every few months.

Should you register before you have to?

Sometimes, yes. Voluntary registration is genuinely worth considering when:

  • Your customers are mostly VAT-registered businesses. They reclaim the VAT you charge, so it costs them nothing, and you get to reclaim the VAT on your own costs. For a business-to-business firm this is often a straightforward gain.
  • You have significant costs with VAT on them. Equipment, stock, software, premises. Registering lets you claim that VAT back.
  • You want to look established. Some larger clients quietly prefer suppliers who are VAT-registered, reading it as a sign of scale.

It is usually the wrong move when your customers are members of the public who cannot reclaim VAT. Registering would mean either raising your prices by 20 per cent or absorbing the VAT from your margin, and neither is comfortable.

The honest summary

Track your rolling 12-month taxable turnover every month. Register within 30 days of crossing £90,000. If you sell mainly to other businesses, consider registering early. If you sell to the public, stay under as long as it makes commercial sense, and plan for the jump rather than being surprised by it.

And if the words "rolling twelve months" have just made you want to open a spreadsheet, that is precisely the kind of thing we take off your plate. VAT registration, returns and Making Tax Digital compliance are included in every SJE Capital plan.

Source: HMRC guidance on GOV.UK, gov.uk/vat-registration. Figures correct for the 2026/27 tax year and reviewed September 2026. This article is general guidance, not advice on your specific circumstances.

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