When Should You Register for VAT?
VAT registration is compulsory when a business’s VAT-taxable turnover exceeds the registration threshold. For 2026/27, the threshold is £90,000.
The test uses taxable turnover, not profit. Taxable turnover includes most standard-rated, reduced-rated and zero-rated sales, but normally excludes exempt and outside-the-scope income.
The Rolling 12-Month Test
At the end of every month, calculate taxable turnover for the previous 12 months. This is a rolling period, not your accounting year or the tax year.
If turnover exceeds £90,000, you must normally notify HMRC within 30 days of the end of that month. Registration usually takes effect from the first day of the second month after the threshold was exceeded.
Expected Turnover
A separate test applies if you expect taxable turnover to exceed £90,000 during the next 30 days alone. You must normally register by the end of that 30-day period, with registration taking effect from the date the expectation arose.
Monitoring turnover regularly is therefore essential. Waiting for the year-end accounts may result in late registration, VAT being due on earlier sales, interest and possible penalties.
Include all relevant sales when monitoring the threshold, including zero-rated supplies, and review unusual or one-off transactions before excluding them.
Voluntary VAT Registration
Businesses below the threshold can register voluntarily. This may be beneficial where:
- Customers are mainly VAT-registered businesses
- The business has significant VAT-bearing costs
- Registration supports a more established commercial image
However, registration also means charging VAT where applicable, maintaining digital records and submitting VAT returns. This can affect prices and profit margins, particularly when customers cannot recover VAT.
What Happens After Registration?
The business must issue valid VAT invoices, apply the correct VAT rates and use compatible software under Making Tax Digital. Different schemes, including VAT Cash Accounting, may improve administration or cash flow.
Late registration does not remove the VAT liability. A business may have to calculate VAT on sales made before it started charging customers, potentially reducing the income it keeps. HMRC can sometimes grant an exception where turnover only exceeded the threshold temporarily, but this must be requested and supported by evidence.
GMS Accountants can review turnover, complete registration and prepare VAT returns for businesses in Cambridge and Nottingham. Visit our VAT services page or contact us before the threshold is reached.
