Last checked 19 October 2026
Quick answer
GOV.UK says you must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days. It’s a rolling test, not a tax year test. You can choose to register below the threshold, which GOV.UK calls voluntary registration. Once registered, HMRC signs your business up to Making Tax Digital for VAT unless it’s exempt.
This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation. We can’t tell you whether registering early would suit your business. Why we say this.
VAT is separate from Income Tax and Self Assessment. Many sole traders never reach the threshold, but it’s worth understanding the test early, because GOV.UK says that if you register late you must pay VAT on sales made since the date you should have registered.
The two tests
GOV.UK’s Register for VAT guide says you must register if either:
- your total taxable turnover for the last 12 months goes over £90,000
- you expect your taxable turnover to go over £90,000 in the next 30 days
Looking back: the rolling 12 months
The 12 months is any 12 month period, checked as you go, not the tax year. GOV.UK says you must register within 30 days of the end of the month when you went over. Your effective date of registration is the first day of the second month after you go over.
GOV.UK’s example: on 15 July your taxable turnover for the last 12 months is £100,000, the first time it’s gone over. You must register by 30 August, and your effective date of registration is 1 September.
Looking forward: the next 30 days
You must register if you realise your taxable turnover will go over £90,000 in the next 30 days alone. GOV.UK says you have to register by the end of that 30 day period, and your effective date is the date you realised, not the date you went over.
GOV.UK’s example is a £100,000 contract agreed on 1 May, to be paid at the end of May. The application must go in by 30 May, and the effective date is 1 May.
What counts as taxable turnover
GOV.UK says taxable turnover is the total value of everything you sell that isn’t VAT exempt or “out of scope”. It includes zero-rated, reduced-rated and standard-rated goods and services, plus items such as goods you hire or loan to customers and business goods used for personal reasons. GOV.UK has a full list.
If you only sell exempt or out of scope goods and services, GOV.UK says you don’t have to register. The rules on what’s exempt are on GOV.UK’s when not to charge VAT page.
Taxable turnover for VAT isn’t the same as qualifying income for Making Tax Digital for Income Tax. Our £30,000 MTD threshold guide explains that test.
Temporary peaks and exemptions
GOV.UK describes two routes that may apply:
- Exception: if your taxable turnover goes over the threshold temporarily, you can apply for a registration exception. HMRC considers it and writes to tell you. If it says no, it registers you.
- Exemption from registration: if most of your taxable sales are zero-rated, you might not need to register, but you need to ask HMRC for permission.
Voluntary registration
GOV.UK says you can choose to register if your turnover is under £90,000. Its Become a sole trader guide notes that some people register before they have to so they can reclaim VAT on business expenses.
Whether that works for you depends on things like who your customers are and what you buy. GOV.UK says you must pay HMRC any VAT you owe from the date they register you, and you’d take on the responsibilities below. An accountant can look at your figures with you.
What changes when you’re registered
GOV.UK’s How VAT works guide says a VAT-registered business must:
- include VAT in the price of goods and services at the correct rate
- keep records of the VAT it pays on things it buys for the business
- send a VAT return to HMRC, usually every 3 months
- pay any VAT it owes
Most goods and services are charged at the standard rate of 20%, unless they’re reduced or zero-rated. GOV.UK says the VAT you pay is usually the difference between the VAT you’ve charged customers and the VAT you’ve paid other businesses. If you’ve paid more than you’ve charged, HMRC usually repays the difference.
After registering, GOV.UK says you get a 9-digit VAT registration number, which you must include on all invoices you raise, and you must sign up for a VAT online account as soon as you receive it.
While you wait for your number
GOV.UK says you can’t include VAT on invoices until you get your registration number, but you can increase your prices to account for the VAT you’ll need to pay. Once the number arrives, you reissue the invoices showing VAT.
Making Tax Digital for VAT
GOV.UK says HMRC will sign up your business to Making Tax Digital for VAT when you register, unless it’s exempt or you’ve applied for an exemption. GOV.UK’s VAT record keeping guide says you must then keep some VAT records digitally, using compatible software or other software, such as spreadsheets, that connects to HMRC systems.
If you’re also in the April 2027 group for MTD for Income Tax, GOV.UK’s software guidance says to check whether your VAT software also works for MTD for Income Tax, or whether your chosen software can meet your VAT needs. See our guide to bookkeeping software for new sole traders.
GOV.UK’s MTD qualifying income guidance adds that if you use the cash basis and are VAT registered, you can choose to include or exclude VAT when you declare your business income, and if you include it, it counts towards your qualifying income.
The Flat Rate Scheme
GOV.UK lists several VAT schemes. They’re voluntary to join and don’t change the VAT you charge customers. The VAT Flat Rate Scheme is one that small businesses often ask about. GOV.UK says:
- you may be able to join if your VAT taxable turnover is £150,000 or less (excluding VAT)
- you pay HMRC a fixed percentage of your turnover, set by your business type
- you can’t reclaim VAT on purchases, except certain capital assets over £2,000
- you get a 1% discount in your first year as a VAT-registered business
- a “limited cost business”, one that spends very little on goods, pays a higher rate of 16.5%
Leaving VAT
GOV.UK says you can ask HMRC to cancel your registration if your taxable turnover falls below £88,000, unless certain conditions apply. You must cancel within 30 days if you stop being eligible to be registered.
Frequently asked questions
Is the £90,000 threshold based on the tax year?
No. GOV.UK describes it as total taxable turnover for the last 12 months, which is a rolling period, plus a separate forward-looking 30 day test.
Is it based on profit or turnover?
Turnover. GOV.UK says taxable turnover is the total value of everything you sell that isn’t VAT exempt or out of scope.
What happens if I register late?
GOV.UK says you must pay VAT on any sales since the date you should have registered, and you might need to pay a penalty depending on how much you owe and how late you are.
Can I register voluntarily?
Yes. GOV.UK says you can choose to register if your turnover is less than £90,000. Speak to an accountant about whether it would suit you.
Do I need software once I’m VAT registered?
GOV.UK says HMRC signs VAT-registered businesses up to Making Tax Digital for VAT unless they’re exempt. You then keep some VAT records digitally, using compatible software or other software, such as spreadsheets, that connects to HMRC systems.
Does VAT count towards the £30,000 MTD threshold?
It can. GOV.UK says that if you use the cash basis and are VAT registered, you can choose to include or exclude VAT in your business income, and if you include it, it counts towards qualifying income.
Sources
All checked on GOV.UK on 19 October 2026.
- Register for VAT
- How VAT works
- VAT Flat Rate Scheme
- Become a sole trader
- Charge, reclaim and record VAT, including when not to charge VAT and keeping VAT records
- Choose the right software for Making Tax Digital for Income Tax (updated 13 July 2026)
- Work out your qualifying income for Making Tax Digital for Income Tax (updated 11 September 2026)
Where to check
What changed. : . 19 October 2026: First published.
