VAT
The £90,000 VAT threshold: when do you have to register?
You must register for VAT once your taxable turnover passes £90,000 in any rolling 12-month period — and you have 30 days to notify HMRC once it happens. The figure has been £90,000 since April 2024 and is unchanged for the current tax year. The rules sound simple; the way the threshold is measured is what catches people out. Here's what matters.
It's a rolling 12 months — not your tax year
This is the mistake we see most. The test is not "did I turn over £90,000 this tax year". At the end of every month, you look back at your last 12 months of VAT-taxable sales. If that rolling total has crossed £90,000, the clock starts: you must notify HMRC within 30 days, and you'll be registered from the start of the following month. A business that "only" does £80,000 a year can still cross the line after a strong six months.
The 30-day forward test
There's a second, less-known trigger. If you have reasonable grounds to believe your taxable sales will exceed £90,000 in the next 30 days alone — you've just signed one big contract, say — you must register immediately, not wait for the rolling total to catch up. Landing a large job is exactly the moment to take advice, before you invoice it.
What counts towards the £90,000?
Your VAT-taxable turnover: standard-rated, reduced-rated and zero-rated sales all count. Only genuinely VAT-exempt income (and income outside the scope of VAT) is left out. It's also turnover, not profit — a low-margin business hits the threshold on gross sales regardless of what it keeps.
What happens if you register late?
HMRC backdates your registration to when you should have registered — which means paying VAT on sales you never charged it on, out of your own pocket, plus penalties and interest. Six months late on £50,000 of sales is roughly £8,300 you can't recover from customers. Tracking your rolling total monthly costs nothing; late registration is one of the most expensive avoidable mistakes a growing business makes.
When registering early is the smart move
Voluntary registration below the threshold can genuinely pay when most of your customers are VAT-registered businesses (they reclaim what you charge, so your prices don't really rise), when you have significant VAT on your own costs to reclaim, or when you're close to the line and want your systems ready before it's compulsory. If you sell mainly to the public, the calculation usually goes the other way — adding 20% to consumer prices is a real cost.
The practical routine
Check your rolling 12-month total at the end of each month — Xero does this in seconds. If you're within £10,000–£15,000 of the threshold, that's the moment to plan: scheme choice (standard, flat rate, cash accounting), pricing, and timing all have better options before you cross than after. If your Leeds business is anywhere near the line, we'll check your position and map the right scheme in one short call.
This is general information, not advice for your circumstances. If you'd like it applied to your situation, get in touch — the first chat is free.
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