VAT threshold: the rolling 12-month test that catches businesses out

The VAT threshold is £90,000 of taxable turnover. You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. The 12 months roll forward every month, so it isn’t tied to your tax year or accounting year.

Key takeaways

• The VAT threshold is £90,000 of taxable turnover over a rolling 12 months, tested at the end of every month.
• Zero-rated sales count; exempt and out of scope sales don’t.
• Go over, and you have 30 days from the end of that month to register.
• Register late and you owe VAT from the date you should have registered, even if you didn’t charge it.

What is the VAT threshold for 2026 to 2027?

The VAT registration threshold is £90,000 (GOV.UK). It has been £90,000 since 1 April 2024, up from £85,000 (VAT Notice 700/1 supplement).

Once registered, you can choose to cancel your registration if your taxable turnover falls below £88,000, the deregistration threshold. Businesses under £90,000 can also register voluntarily.

How does the rolling 12-month VAT threshold test work?

At the end of every month, you look back at your taxable turnover for the previous 12 months (or less, for a newer business). If it’s over £90,000, you must register (VAT Notice 700/1).

You then have 30 days from the end of that month to register, and your effective date of registration is the first day of the second month after you went over (GOV.UK). From that date you charge VAT on your sales and can reclaim VAT on purchases (GOV.UK).

An illustration with made-up figures: a business with a 31 March year end had taxable turnover of £84,000 last year (£7,000 a month). From April, sales rise to £8,000 a month, so its rolling total climbs £1,000 each month end. It’s exactly £90,000 at the end of September (not over), then £91,000 at the end of October. It must register by 30 November, with an effective date of 1 December. Waiting for year-end figures would mean registering months late.

What counts towards VAT taxable turnover?

Taxable turnover is the total value of everything you sell that isn’t VAT exempt or “out of scope” (GOV.UK). As well as standard-rated, reduced-rated and zero-rated goods, it includes:

• goods you hired or loaned to customers, or 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” (you, the customer, act as both supplier and recipient)
• goods and services subject to the “domestic reverse charge”
• building work over £100,000 that your business did for itself

Sales of capital assets, such as equipment or vehicles, don’t need to be included. The catch: land or buildings sold under an option to tax (which normally makes the sale standard-rated, not exempt) count unless the sale was zero-rated (VAT Notice 700/1).

If you only sell exempt or out of scope goods and services, you don’t have to register. If all or most of your sales are zero-rated, you can ask HMRC for an “exemption from registration”. If it’s granted, you can’t reclaim VAT on your costs and must tell HMRC if your sales change (VAT Notice 700/1).

Do you need to register if one big job is coming up?

There’s a second, forward-looking test. You must register if you expect your taxable turnover to go over £90,000 in the next 30 days alone (GOV.UK). You register by the end of that 30-day period, and your effective date of registration is the date you realised.

GOV.UK’s example: on 1 May, a business agrees a £100,000 contract to provide services, paid at the end of May. It must apply by 30 May, and its effective date is 1 May.

This test is about sales within a single 30-day period, such as a one-off contract. If ordinary trading next month will simply push your 12-month total over, that’s the rolling test, and you become liable at the end of that month (HMRC manual VATREG18200).

What happens if you register for VAT late?

HMRC registers you from the date you should have been registered, and you account for VAT from then even if you didn’t charge it to customers, though you may be able to offset VAT on business costs if you hold VAT invoices (VAT Notice 700/1).

You may also be charged a penalty for “failure to notify”. It’s a percentage of the “potential lost revenue”: the VAT due from the date you should have been registered to the day before you told HMRC or HMRC otherwise found out (HMRC manual CH72740).

For a non-deliberate failure the range is 0% to 30%. The minimum rises to 10% if your disclosure was “prompted” (you already had reason to believe HMRC was about to find out) or came 12 months or more after the tax was due, and to 20% if both. Deliberate failures range from 20% to 70% (35% minimum if prompted), and deliberate and concealed failures from 30% to 100% (50% minimum if prompted) (GOV.UK factsheet CC/FS11).

There’s no penalty for a non-deliberate failure if you had a reasonable excuse and put things right without unnecessary delay once it ended. Otherwise, “telling, helping and giving” (owning up, helping HMRC work out the amount, giving access to records) can reduce it (GOV.UK).

What if you only go over the VAT threshold temporarily?

If you’ve gone over on the rolling test, you may not have to register if you can show HMRC that your taxable turnover won’t go over the £88,000 deregistration threshold in the next 12 months. This “exception from registration” must be applied for (GOV.UK). It isn’t available under the 30-day test (HMRC manual VATREG19050).

HMRC will reply within 40 working days. If it refuses, it registers you and you account for VAT from the date you were liable. If it agrees, the monthly checks carry on (GOV.UK).

What happens while you wait for your VAT number?

You mustn’t show VAT as a separate item on invoices until you’ve received your VAT registration number. HMRC says you may wish to raise prices to include VAT meanwhile, tell VAT-registered customers that VAT invoices will follow, then send them within 30 days of getting your number (VAT Notice 700/1).

Frequently asked questions

Getting help

Our VAT page covers timing your registration, choosing a scheme and preparing returns. Our bookkeeping and management accounts pages cover up-to-date records and monthly or quarterly reporting.

If you’re keeping an eye on the VAT threshold for a business in Wisbech or the wider Fenland area, you can call our office landline on 01945 581102, 8am to 4pm, Monday to Friday.

Written by the team at Barwell Accountants, ACCA chartered certified accountants.

This article is general information only, correct at the time of writing (26 October 2026). It isn’t financial, tax or legal advice and shouldn’t be relied on. Rules change and everyone’s circumstances differ, so take professional advice before acting. We accept no responsibility for any action taken based on this article.

Sources

• Register for VAT
• Register for VAT: how to register
• How VAT works: VAT thresholds
• Who should register for VAT (VAT Notice 700/1)
• VAT Notice 700/1: supplement (current and past thresholds)
• Apply for an exception from registering for VAT
• Opting to tax land and buildings (VAT Notice 742A)
• VAT place of supply of services (VAT Notice 741A): reverse charge
• HMRC VAT Registration Manual VATREG18200: the forward look
• HMRC VAT Registration Manual VATREG19050: exception from registration
• Compliance checks: penalties for failure to notify (CC/FS11)
• HMRC Compliance Handbook CH72740: potential lost revenue, VAT registration