The VAT registration threshold is £90,000. Almost everyone knows the number. Far fewer know what it is measured against — and that is where businesses get caught.
It is not your accounting year. It is not the tax year. It is a rolling 12-month total, recalculated at the end of every single month. A business can sail through its year end nowhere near the threshold and be liable to register four months later without a single month’s turnover changing.
The rolling 12-month test
At the end of every month, add up your taxable turnover for that month and the eleven before it. If the total is more than £90,000, you must register.
Next month you do it again. The oldest month drops out of the window and the newest month joins it. The window moves; the threshold does not.
This is a backward-looking test. It asks what you have already supplied, not what you expect to supply. There is a separate forward-looking test, covered below, and the two run in parallel — you can be caught by either.
The £90,000 figure has applied since 1 April 2024, when it rose from £85,000. The deregistration threshold rose at the same time, from £83,000 to £88,000.
What counts as taxable turnover
Taxable turnover is the total value of everything you sell that is not VAT exempt or outside the scope of VAT. It is measured on the value of the supplies you make, not on the cash you have collected.
It includes:
- standard-rated, reduced-rated and zero-rated goods and services
- goods you hired or loaned to customers
- business goods used for personal reasons
- goods you bartered, part-exchanged or gave as gifts
- services you received from businesses in other countries that you had to reverse charge
- goods and services subject to the domestic reverse charge
- building work over £100,000 your business did for itself
It excludes exempt supplies and anything out of scope of UK VAT.
Two misreadings do real damage. The first is treating zero-rated sales as if they do not count — they do, in full. The second is testing profit rather than turnover. The threshold is a turnover test; a business with £120,000 of sales and £15,000 of profit is over it.
A worked example, month by month
A consultancy starts trading in October 2025. Because it is new, the rolling total is simply cumulative until twelve months have passed.
| Month | Taxable turnover | Rolling 12-month total |
|---|---|---|
| Oct 2025 | £6,000 | £6,000 |
| Nov 2025 | £6,000 | £12,000 |
| Dec 2025 | £4,000 | £16,000 |
| Jan 2026 | £6,000 | £22,000 |
| Feb 2026 | £7,000 | £29,000 |
| Mar 2026 | £8,000 | £37,000 |
| Apr 2026 | £8,000 | £45,000 |
| May 2026 | £8,000 | £53,000 |
| Jun 2026 | £9,000 | £62,000 |
| Jul 2026 | £9,000 | £71,000 |
| Aug 2026 | £9,000 | £80,000 |
| Sep 2026 | £9,000 | £89,000 |
| Oct 2026 | £8,000 | £91,000 — over the threshold |
| Nov 2026 | £5,000 | £90,000 |
Read the October 2026 row carefully. Turnover that month was £8,000 — lower than the three months before it. The business still crossed the threshold, because October 2025’s £6,000 dropped out of the window and October 2026’s £8,000 replaced it. A £2,000 swing on a month that felt quieter than usual is what tipped it over.
Note the November row too. The rolling total falls back to £90,000, which is not over the threshold. That changes nothing. Liability is triggered the moment you cross; falling back afterwards does not undo it. Once registered you stay registered until you cancel.
And note what a year-end check would have shown. If this business had a 31 March year end, its accounts to 31 March 2026 would have shown £37,000 of turnover — 41% of the threshold. Nothing about that figure warns you that registration is seven months away.
The deadline once you cross
| Step | Timing |
|---|---|
| Notify HMRC | Within 30 days of the end of the month you went over |
| Effective date of registration | The first day of the second month after you went over |
Applying the example above: the business went over during October 2026, so it must register by 30 November 2026, and its effective date of registration is 1 December 2026. It owes VAT on everything it supplies from 1 December, whether or not its VAT number has arrived by then.
HMRC’s own worked example follows the same shape. Rolling turnover reaches £100,000 on 15 July, registration is due by 30 August, and the effective date is 1 September.
The forward-look test
The second test runs alongside the first and works in the opposite direction.
You must register if you realise your total taxable turnover is going to go over £90,000 in the next 30 days alone. Not over the next twelve months — in the next 30 days, on its own.
You must register by the end of that 30-day period, and your effective date of registration is the date you realised, not the date the turnover actually arrives.
HMRC’s example: on 1 May you arrange a £100,000 contract to provide services, to be paid at the end of May. You must submit your registration by 30 May, and your effective date of registration is 1 May.
This test bites hardest on lumpy businesses. A contractor who wins one large project can be liable to register on the day the contract is signed, months before their rolling total goes anywhere near £90,000.
The exception for a temporary spike
If your turnover goes over the threshold temporarily, you can apply for a registration exception.
You may qualify if, at the end of any month, both of these are true:
- your taxable supplies went over the registration threshold in the last 12 months, and
- you can show your taxable supplies will not go over the deregistration threshold of £88,000 in the next 12 months
The exception is not automatic and you cannot claim it on the online form. You contact HMRC by phone to request form VAT1, and they send you VAT1 together with form VAT5EXC. Complete both and return them.
HMRC writes to you within 40 working days with a decision. If they approve it you are not registered — but you must keep testing your rolling 12-month turnover every month, and if you go over again you either register or apply for an exception again. If they refuse, they use your VAT1 to register you and you must account for VAT from the date you became liable.
A one-off contract that genuinely will not repeat is the classic case. A sustained upward trend is not, and it is not worth trying.
Frequently asked questions
Is the VAT threshold based on the tax year?
No. It is a rolling 12-month test, recalculated at the end of every month against the previous twelve months. Your accounting year and the tax year are irrelevant to it. There is also a separate forward-look test based on the next 30 days.
Do zero-rated sales count towards the £90,000?
Yes, in full. Taxable turnover includes standard-rated, reduced-rated and zero-rated supplies. Only exempt supplies and supplies outside the scope of UK VAT are excluded.
What happens if my turnover drops back below the threshold after I cross it?
Nothing is undone. Liability is triggered at the moment you cross, and falling back below £90,000 in a later month does not remove it. Once registered, you stay registered until you apply to cancel — which you can do if your taxable turnover falls below the deregistration threshold of £88,000.
How long do I have to tell HMRC once I go over the VAT threshold?
You have 30 days from the end of the month in which you went over. Your effective date of registration is the first day of the second month after you went over, and you owe VAT on supplies from that date.
Can I avoid registering for VAT if I only went over the threshold once?
Possibly, through a registration exception. You must be able to show HMRC that your taxable supplies will not exceed the deregistration threshold of £88,000 over the next 12 months. You apply on forms VAT1 and VAT5EXC, and HMRC writes to you within 40 working days with a decision.
Watching the right number
The rolling test is not difficult, but it needs checking monthly and almost nobody does. The businesses that get caught are not the ones that ignored VAT — they are the ones that looked at their year end figures, saw plenty of headroom, and did not look again.
SmartFiling handles MTD VAT registration and quarterly filing on a fixed fee, working directly in Xero, QuickBooks or FreeAgent. Every return is reviewed and signed off by an ICAEW Chartered Accountant, and everything runs online.
