The VAT registration threshold for the tax year 2025/26 is £90,000.
In 2024, the VAT registration threshold changed for the first time in eight years. From 1 April 2024, businesses have a higher limit before they need to register for VAT (Value Added Tax).
What is the VAT Registration Threshold?
The VAT registration threshold refers to a monetary amount determining whether a business must register for VAT in the UK.
If your business has a VAT-taxable turnover above the VAT registration threshold, it becomes subject to VAT and must register with HMRC.
You do not need to register for VAT if your business has a VAT-taxable turnover below this limit. However, you can register voluntarily.
The threshold applies to all types of businesses; sole traders, partnerships, and limited companies.
The Numbers You Need to Know
The key figures are:
- VAT registration threshold in 2025/26: £90,000
- VAT deregistration threshold in 2025/26: £88,000
When You Must Register for VAT
Your business needs to register in two main situations:
- If your VAT taxable turnover goes over £90,000 in any 12 months
- If you expect to go over £90,000 in the next 30 days
The 12-Month Rule
You need to monitor your VAT taxable turnover for a rolling 12-month period. At the end of every month, you should check your turnover for the last 12 months to see if you exceed the VAT registration threshold.
You must apply to be registered for VAT within 30 days after the end of the month in which your VAT taxable annual turnover exceeded the threshold. Your effective date of registration is the first day of the following month.
For example, in August you realise that your VAT taxable turnover in the 12 months to July was above the registration threshold. You exceeded the threshold in July. You need to register by 30 August (30 days after the end of the month in which the threshold was crossed). Your effective date of registration is 1 September.
The 30-Day Rule:
You must also register if you think your VAT taxable turnover will exceed the threshold in the next 30 days.
You have to register by the end of that 30-day period. Your effective registration date will be the day you realised the threshold would be exceeded (not the day it was actually crossed).
For example, on 1 May, you realise that your VAT taxable turnover will exceed the threshold within the next 30 days. You are now obliged to register for VAT by 30 May. Your effective date of registration is 1 May.
What is Included in Turnover for the VAT Threshold?
Your VAT-taxable turnover is the total value of your UK sales excluding any sales that are exempt from VAT.
Examples of goods or services exempt from VAT include:
- Lottery ticket sales
- Health services provided by professionals (doctors, dentists, opticians etc.)
- Financial services
- Insurance
Exempt goods and services are not the same as zero-rated goods and services. VAT is charged on zero-rated goods and services but at a rate of 0%.
Zero-rated goods and services include:
- Food and drink (exceptions include alcohol, hot food, and crisps)
- Maternity pads
- Books, magazines, and newspapers
What Happens After Registration
When you register, you must:
- Start charging VAT (usually 20%)
- Keep digital VAT records
- Submit regular VAT returns
- Follow Making Tax Digital rules
VAT Rates in the UK
VAT in the UK is applied at different rates depending on the type of goods or services being supplied. The table below shows the main rates.
| Rate Type | Percentage | Applies To |
|---|---|---|
| Standard Rate | 20% | Most goods and services |
| Reduced Rate | 5% | Domestic fuel, children’s car seats |
| Zero Rate | 0% | Essential items |
The standard rate of 20% applies to most goods and services in the UK, while the reduced rate of 5% is for specific items such as domestic energy and children’s car seats. Zero-rated items, including most food and drink (with some exceptions), printed books, and children’s clothing are taxable but at a rate of 0%, meaning no VAT is charged.
Businesses should be careful to determine the correct rate for each item or service. Applying the wrong VAT rate can lead to compliance issues and potential penalties.
Historical VAT Thresholds
The VAT registration threshold has remained unchanged for several years but increased in 2024. Here is a summary of recent historical VAT thresholds:
| Tax Year | Registration Threshold |
|---|---|
| 2024-2025 | £90,000 |
| 2023-2024 | £85,000 |
| 2022-2023 | £85,000 |
| 2021-2022 | £85,000 |
| 2020-2021 | £85,000 |
The registration threshold was set at £85,000 from 2017 until 2023. The recent increase aims to reduce the administrative burden on smaller businesses and encourage growth by allowing more companies to operate below the VAT threshold without needing VAT compliance.
Voluntary Registration
If your VAT taxable turnover is below the threshold, you can register for VAT voluntarily.
Deregistration Options
You can cancel your VAT registration if your circumstances change and meet one of the following conditions:
- Your turnover drops below £88,000 in any 12-month period. This can occur if your business experiences a decline in sales or reduces its operations. It is crucial to monitor your turnover regularly to determine if deregistration is appropriate.
- You stop trading permanently, meaning you have ceased all business operations and no longer intend to carry out any business activities.
- You join a VAT group, which allows multiple companies or entities under common control to be treated as a single taxable entity for VAT purposes.
The VAT Trap
The VAT threshold creates an unintended ‘VAT trap’. Many businesses deliberately limit growth to stay below the VAT threshold. This behaviour leads to reduced productivity, lost tax revenue, and market distortions.
