What is the VAT registration threshold in the UK in 2026?

The mandatory VAT registration threshold is £90,000 in any rolling 12-month period. This was raised from £85,000 in the March 2024 Budget, effective 1 April 2024. You must register within 30 days of the end of the month in which your taxable turnover exceeded the threshold.

Do I have to register for VAT if my turnover is under £90,000?

No — voluntary registration is optional below the threshold. However, it can be beneficial if your customers are VAT-registered businesses (they can reclaim the VAT you charge), or if you make significant purchases on which you want to reclaim input VAT.

How long does it take to get a VAT number from HMRC?

HMRC typically processes VAT registrations within 10–30 working days, though it can take longer during busy periods. You can begin charging VAT from your effective date of registration, even before your VAT number arrives.

Can I reclaim VAT on purchases made before I registered?

Yes. You can reclaim VAT on goods purchased up to 4 years before your registration date (provided you still hold them), and on services purchased within the 6 months immediately before registration. Claims are made on your first VAT return.

What is the VAT Flat Rate Scheme?

The Flat Rate Scheme simplifies VAT for businesses with taxable turnover under £150,000. Instead of calculating VAT on every transaction, you pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC. The percentage varies by business sector — for example, IT consultants pay 14.5% and general retailers pay 7.5%.

VAT Registration for Small Businesses — UK Guide 2026

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. Whether you are legally required to register or considering registering voluntarily, understanding how VAT works is essential for running a compliant and financially efficient business.

The £90,000 VAT Registration Threshold

You must register for VAT if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. This threshold has been in place since April 2024, raised from the previous £85,000 limit. The threshold applies to your taxable turnover — that is, all sales of goods and services that are not VAT-exempt.

Important: You must register within 30 days of the end of the month in which you exceeded the threshold. HMRC can issue penalties for late registration, and you may be liable for VAT on sales made from the date you should have registered — even if you did not charge it to customers.

You must also register if you expect your taxable turnover to exceed £90,000 in the next 30 days alone — for example, if you win a large contract. In this case you must register immediately, before the 30-day period ends.

Voluntary VAT Registration

Even if your turnover is below £90,000, you can choose to register for VAT voluntarily. This can offer several commercial and financial advantages:

Reclaim input VAT — you can recover the VAT you pay on business purchases, from equipment and stock to software subscriptions and professional fees.
Appear more established — many larger businesses and public-sector organisations prefer to deal with VAT-registered suppliers, as it allows them to reclaim the VAT you charge.
Competitive pricing — if your customers are predominantly VAT-registered businesses, adding VAT to your invoices costs them nothing net, so you can effectively price more competitively.

Consider carefully if your customers are consumers (B2C). Private individuals cannot reclaim VAT, so registering voluntarily increases your effective price by up to 20% unless you absorb the VAT within your current prices.

UK VAT Rates

Not all goods and services attract VAT at the same rate. The three main rates are:

Rate	Percentage	Examples
Standard rate	20%	Most goods and services — clothing (adult), electronics, consultancy, software
Reduced rate	5%	Domestic energy (gas and electricity), children's car seats, some renovation work
Zero rate	0%	Most food, children's clothing, books, newspapers, most public transport
Exempt	N/A	Insurance, financial services, education, health services, residential property letting

Zero-rated and exempt sound similar but are legally different. Zero-rated sales are still taxable supplies — you can reclaim input VAT on costs related to them. Exempt supplies are outside the VAT system; you generally cannot reclaim input VAT on costs related to exempt activities.

How to Register for VAT

Most businesses register online via the HMRC VAT registration service at GOV.UK. You will need your Government Gateway user ID, business details, bank account information, and estimated turnover figures. HMRC typically issues your VAT registration number within 10 working days, though it can take longer during busy periods.

Once registered you will receive a VAT certificate confirming your registration number, effective date of registration, and the dates of your first VAT return period. You can start charging VAT from your effective registration date.

VAT Accounting Schemes

HMRC offers several VAT schemes designed to reduce administrative burden or smooth cash flow for smaller businesses. The right scheme depends on your turnover, the nature of your customers, and how you manage your accounts.

Flat Rate Scheme (FRS)

Available to businesses with a taxable turnover of £150,000 or less (excluding VAT). Instead of calculating the exact VAT on every sale and purchase, you pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC. The percentage varies by business sector — for example, IT consultants pay 14.5%, accountants 14.5%, and retailers of food pay 4%.

The FRS reduces paperwork and can generate a small profit because you charge customers 20% VAT but pay a lower flat rate percentage. However, you cannot reclaim VAT on purchases (except for certain capital assets over £2,000). In the first year of VAT registration, you receive a 1% discount on your flat rate.

Limited Cost Trader rule: If you spend less than 2% of your VAT-inclusive turnover (or less than £1,000 per year) on goods, HMRC designates you a "limited cost trader" and your flat rate is 16.5% — which often makes the FRS unattractive for service-based businesses.

Cash Accounting Scheme

Available to businesses with a taxable turnover of £1.35 million or less. Under standard VAT accounting, you account for VAT when you invoice — regardless of when you are paid. The cash accounting scheme means you only pay VAT to HMRC when your customer actually pays you, and only reclaim input VAT when you have paid your supplier.

This is particularly useful if you offer extended payment terms or have customers who pay slowly, as it removes the risk of paying VAT to HMRC before you have collected it.

Annual Accounting Scheme

Available to businesses with a taxable turnover of £1.35 million or less. Instead of filing four quarterly VAT returns, you file one return per year. You make advance payments on account throughout the year (either monthly or quarterly) based on your previous year's VAT liability, then submit a single annual return to settle any balance. This reduces paperwork but means you must manage your cash flow carefully to ensure your payments on account are accurate.

Making Tax Digital for VAT

Since April 2022, all VAT-registered businesses — regardless of turnover — must comply with Making Tax Digital (MTD) for VAT. MTD requires you to:

Keep digital VAT records (in compatible software or a spreadsheet linked to bridging software)
Submit VAT returns directly to HMRC via MTD-compatible software — you cannot use HMRC's old online portal
Maintain a digital audit trail from source data through to your VAT return (the "digital links" requirement)

Compatible software includes Xero, QuickBooks, Sage, FreeAgent, and many others. HMRC maintains a full list of approved software. Penalties apply for non-compliance with MTD obligations.

VAT Returns and Payments

Most businesses submit VAT returns quarterly. Your return is due one month and seven days after the end of your VAT period — for example, if your quarter ends 31 March, your return and payment are due by 7 May. Payment must also be made by this date; HMRC operates a points-based penalty system for late submissions and surcharge interest on late payments.

If you are in a VAT repayment position — because your input VAT exceeds your output VAT — HMRC will repay the difference. Businesses that regularly reclaim VAT (such as exporters or zero-rated suppliers) can opt for monthly VAT returns to improve cash flow.

De-registration

You can apply to de-register for VAT if your taxable turnover falls below the deregistration threshold of £88,000. De-registration may suit you if your business has shrunk, you are changing business model, or you serve mainly consumers and the VAT admin outweighs the benefits. Be aware that you may need to account for VAT on assets held at the time of de-registration.

Next steps: Use HMRC's VAT threshold checker, speak to a qualified accountant about the most suitable VAT scheme for your business, and ensure your accounting software is MTD-compatible before you register.