UK VAT Registration Threshold 2026/27: £90,000 Guide

The VAT Threshold for 2026/27

The UK VAT registration threshold remains at £90,000 for the 2026/27 tax year, with the deregistration threshold at £88,000. The threshold was increased from £85,000 to £90,000 in April 2024 after being frozen for seven years, and has held at that level since.

The seven-year freeze created a well-documented problem. Inflation quietly dragged hundreds of thousands of businesses above the limit, forcing them to register and deal with the administrative and cash flow burden of quarterly VAT returns. The 2024 increase to £90,000 gave some breathing room, but the threshold has not risen further despite continued lobbying from business groups.

If you are already VAT registered and your turnover has fallen below the deregistration threshold of £88,000, you may be able to apply to deregister.

What Counts Towards the Threshold

It is worth being precise about what counts as taxable turnover. It is the value of all VAT taxable supplies, not your profit and not your total receipts. If you sell a mix of zero-rated and standard-rated goods, both count towards the threshold. Exempt supplies, such as certain financial services or residential property lettings, do not count.

The 12-month rolling window catches out a surprising number of businesses. You are not looking at your financial year or a calendar year. You are looking at any consecutive 12-month period ending in the current month. If you hit £90,000 in any rolling 12-month window, you must notify HMRC within 30 days and register from the first day of the second month after you exceeded the limit.

There is also the forward-look test that many people forget about. If at any point you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately. This catches businesses that land a single large contract that would push them over the threshold in one go.

The Cliff Edge Problem

The threshold creates what economists call a bunching effect. Business owners approaching the limit face a strong incentive to hold back revenue or delay invoicing to avoid crossing into VAT territory. Once you register, you are adding 20% to your prices (which your non-VAT-registered competitors do not have to do) or absorbing the 20% yourself, which comes straight off your margin.

A business turning over £89,000 has a powerful reason to avoid that one extra sale. Business groups have argued for a much higher threshold or even a graduated entry system where the rate increases gradually rather than hitting the full 20% all at once. The government has acknowledged the issue but has not committed to structural reform.

Voluntary Registration Still Makes Sense for Some

If your turnover is below £90,000, registration is optional but sometimes advantageous. If your customers are VAT-registered businesses, they can reclaim the VAT you charge them, so charging 20% on top of your prices costs them nothing in real terms. Meanwhile, you can reclaim VAT on your own purchases, which can make a meaningful difference if you have significant input costs on materials, equipment, or professional services.

The downside is the administrative overhead. Making Tax Digital for VAT requires you to keep digital records and submit returns through compatible software. For very small businesses with limited time or appetite for that sort of administration, voluntary registration may not be the right call.

Planning Around the Threshold

If your turnover is within striking distance of £90,000, the decisions you make now matter. Crossing the threshold mid-year can create unexpected VAT liabilities on sales you have already made, particularly if you have not been charging customers VAT. Building a buffer and monitoring your rolling 12-month figures closely is sensible practice.

The VAT Threshold Monitor tool from MBridge calculates your rolling 12-month taxable turnover, flags how close you are to the registration limit, and shows you the date by which you would need to notify HMRC if your current trajectory continues. If you are approaching £90,000, it is worth running your numbers through it regularly rather than discovering you have a problem after the fact.

Deregistration Opportunities

The deregistration threshold of £88,000 is worth noting for businesses that are already registered but whose turnover has softened. If your taxable turnover has dropped below £88,000 and you expect it to stay there, you can apply to deregister. This removes the obligation to charge VAT on your sales and file quarterly returns, which can simplify your administration and potentially make your prices more competitive against non-registered competitors.

The application process is straightforward through your Government Gateway account, but be aware that you may need to account for VAT on any stock and assets you hold at the time of deregistration if the VAT on those items exceeds £1,000.

What to Do Now

Check your rolling 12-month turnover figure. If you are approaching £90,000, start planning for the administrative and pricing implications of registration rather than treating it as a surprise when it arrives. If you are already registered and below £88,000, consider whether deregistration makes sense. And if you are growing towards the threshold, use the VAT Threshold Monitor to track your position in real time.