Crossing the VAT threshold is a milestone — but register at the wrong moment and it can cost you. Here's how VAT registration works in 2026, and when it makes sense.
VAT registration is one of those subjects every growing business eventually has to face. Get the timing right and it is a non-event; get it wrong and you can end up owing HMRC VAT you never charged your customers. This guide covers the 2026 thresholds and the practical decisions behind them.
The 2026 VAT thresholds
The figures have been unchanged since April 2024 and remain in force in 2026:
| Threshold | Amount |
|---|---|
| Registration | £90,000 of VAT-taxable turnover |
| Deregistration | £88,000 |
"VAT-taxable turnover" means the total of everything you sell that is not VAT-exempt — not your profit. The deregistration threshold sits just below registration so businesses hovering around the line do not have to register and deregister repeatedly.
When you must register
There are two tests, and you have to watch both:
- The backward look: if your VAT-taxable turnover over the previous rolling 12 months exceeds £90,000, you must register. This is a rolling 12-month total — not your accounting year.
- The forward look: if you expect your turnover to exceed £90,000 in the next 30 days alone, you must register immediately.
The rolling-year trap: many sole traders only check turnover at year end. But the backward test looks at any rolling 12-month period. A strong few months can tip you over without warning — which is why monitoring matters.
What happens after you register
- You add VAT (usually 20%) to your sales and issue VAT invoices.
- You reclaim VAT on eligible business purchases.
- You file VAT returns — almost always quarterly — and pay HMRC the difference.
- VAT returns must be filed through Making Tax Digital for VAT using compatible software.
Should you register voluntarily?
You can register before you reach £90,000, and sometimes it pays to:
- If your customers are VAT-registered businesses, they reclaim the VAT you charge, so registering lets you recover VAT on your own costs at no real cost to them.
- If you sell mainly to the public, voluntary registration adds 20% to your prices (or eats into your margin), so it is usually best to wait.
- If you are investing heavily in equipment or stock, early registration lets you reclaim that input VAT.
The Flat Rate Scheme and other options
Smaller businesses can choose schemes that simplify VAT — the Flat Rate Scheme (you pay a fixed percentage of turnover), the Cash Accounting Scheme (you account for VAT when you are paid, not when you invoice) and the Annual Accounting Scheme. The right choice depends on your margins, your customers and your cash flow.
Planning around the threshold
Approaching £90,000 is a good problem to have, but it deserves a plan. Whether to register, when, and which scheme to use can change your take-home meaningfully. If you are also deciding how to structure the business as it grows, our guide on sole trader vs limited company pairs well with this one.
We help businesses across Erith and Kent decide when to register, pick the right scheme, and set up MTD-compliant VAT software. Book a free consultation and we'll model the numbers with you.
Need a hand with this? BDH Accounting offers fixed-fee, ACCA-accredited support to sole traders and small businesses across Erith, Bexley, Dartford and Kent. Book a free consultation.
This article is general guidance based on the rules at the time of writing (20 April 2026) and is not personal tax advice. Tax rules change and individual circumstances differ — please get advice before acting.