When to register for VAT as a limited company

You have to register for VAT once your company's taxable turnover over any rolling 12 months passes £90,000. You then have 30 days from the end of that month to tell HMRC. A second test catches growing companies out: if you expect to pass £90,000 in the next 30 days alone, and a single large contract will do it, you register straight away and charge VAT from the day you realised. The threshold has been £90,000 since 1 April 2024 and was unchanged on 20 October 2026, but the Budget on 28 October 2026 could move it.

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The £90,000 threshold, and the two tests that trigger registration

The first test looks backwards. At the end of every month, add up your taxable turnover for the previous 12 months. If it comes to more than £90,000, you have to register (register for VAT).

Those 12 months are a rolling window, not your financial year and not the tax year, so a quiet spring does not reset anything. The same wording sits in the VAT Act itself, which talks about 'the period of one year then ending'.

The second test looks forwards, and it is the one most guides leave out. If at any point you have reasonable grounds to believe your taxable turnover will pass £90,000 in the next 30 days on its own, you have to register then, without waiting to see whether it happens. One contract can trigger it. HMRC's own example: you arrange a £100,000 contract on 1 May, so you must apply by 30 May, and your registration takes effect from 1 May.

Those two tests are not alternatives. Either one can catch you, and the forward test can catch a company whose last 12 months are nowhere near £90,000.

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What counts as taxable turnover

Taxable turnover is everything your company sells in the UK that is not exempt or outside the scope of VAT. It is turnover, not profit, so your costs do not come off it. Zero-rated sales count towards the threshold even though you charge no VAT on them, which surprises a lot of food, children's clothing, and printing businesses. Genuinely exempt sales, such as insurance or certain education and health services, do not count.

One trap worth knowing if you are buying another company: if you take over a VAT-registered business, its taxable turnover and yours are added together for the threshold.

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The date you must register by, and the date you start charging VAT

These are two different dates, and the gap between them is where companies get into trouble.

Under the backward-looking test, you have 30 days from the end of the month in which you went over. Your registration then takes effect from the first day of the second month after you crossed it. HMRC's example: on 15 July your taxable turnover for the last 12 months reaches £100,000, so you must register by 30 August, and your effective date of registration is 1 September.

Under the forward-looking test the timetable is tighter. You register by the end of that 30-day period, and your effective date is the day you realised you were going to go over, not the day the money arrives.

Your effective date matters more than the application date, because it is the date from which you owe HMRC VAT on your sales, whether or not you remembered to charge it.

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What being VAT registered actually means for your company

VAT is a tax on consumption, collected by businesses on the government's behalf. Once you are registered, three things change.

You add VAT to what you sell. Most goods and services are standard-rated at 20%, some are reduced-rated at 5%, and some are zero-rated at 0%. You collect that money from your customers and pass it to HMRC.

You reclaim the VAT you pay. When you buy from another VAT-registered business, you can claim the VAT element back, which brings down the real cost of your costs.

You file returns. Usually that is once every three months, and the deadline for both filing and paying is one calendar month and seven days after the period ends (submit your VAT Return). A nil return is still a return, so it is still due. HMRC also signs every new registration up to Making Tax Digital for VAT, which means digital records and compatible software rather than a spreadsheet and a form.

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How to spot that you are getting close

Nobody tells you when you are approaching the threshold, so three habits are worth building.

• Check your rolling 12-month turnover monthly. Not your year to date, and not your forecast. A rolling total, recalculated at every month end.
• Let your accounting software do it. Most packages will track taxable sales on a rolling basis and warn you, once you have told them to.
• Do not wait for HMRC to get in touch. Registering late is more expensive than registering early, and the penalty depends partly on whether you came forward or were found.

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Registering late is charged as a share of the VAT you should have collected

If you were supposed to register and did not, HMRC charges a failure-to-notify penalty under Schedule 41 of the Finance Act 2008. It is worked out as a percentage of the 'potential lost revenue', meaning the VAT you should have been charging in the meantime. You owe that VAT as well as the penalty.

The percentage depends on why it happened, and on whether you told HMRC or HMRC came to you. A non-deliberate failure is charged at up to 30%. A deliberate one runs from 20% to 70%. A deliberate failure you tried to hide runs from 30% up to 100%, which is the statutory maximum. Coming forward before HMRC contacts you cuts the penalty substantially, and there is no penalty at all for a non-deliberate failure where you had a reasonable excuse (penalties for failure to notify, factsheet CC/FS11, updated 19 March 2026).

Ignore any figure of 5%, 10%, or 15%. Those rates, and the £50 minimum that went with them, belonged to a late-registration penalty that was abolished in April 2010. HMRC's own notice on it says so plainly, yet accountancy sites still quote the rates as current. If you have been told your late registration will cost 15% of the VAT, check it against the factsheet above.

Late registration is a separate matter from filing or paying a return late once you are registered. Those penalties work differently, and we cover them in our guide to HMRC tax penalties.

There is also a way out if you only went over briefly. If you can show HMRC that your turnover crossed £90,000 as a one-off and will stay below the deregistration threshold over the next 12 months, you can apply for an exception and stay unregistered.

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Registering voluntarily below the threshold

You can register at any turnover you like. Whether it is worth it comes down to who your customers are.

The case for it is reclaiming input VAT. If you are spending on stock, equipment, or professional fees, that 20% stops being a real cost and starts being money you get back. Being registered also makes you look like a going concern to larger customers, and VAT-registered customers do not care that you charge VAT, because they reclaim it too.

The case against is the admin, and it is real: digital records, a return every three months, and a deadline that does not move for weekends or bank holidays. If you sell mainly to consumers, the bigger problem is not the paperwork but your prices.

The part you can actually get wrong is the date. When you register voluntarily you choose your own effective date, and you can backdate it by up to four years to pick up VAT on past purchases. But once you are registered you cannot change that date, and a request to amend it carries no right of appeal or review (VAT Notice 700/1, section 3.9). It is worth a conversation with your accountant before you pick it, not after.

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What it does to your prices, and who ends up paying the 20%

You have two choices here, and they land very differently.

If you add VAT on top, a £100 price becomes £120. A VAT-registered business customer pays the £120, reclaims the £20, and is no worse off, so your prices stay competitive. If you sell to consumers, they cannot reclaim anything, and a 20% rise is a 20% rise.

If you hold your price at £100 instead, you absorb the VAT. One-sixth of that £100, £16.67, now belongs to HMRC, so you have given away a sixth of your revenue on every sale. On thin margins that is the whole margin.

The first £90,000 is not VAT free, which is the most common misreading of the rule. Once you are registered you charge VAT on all your taxable sales from your effective date, not only on the sales above the threshold. The threshold decides when you must register, nothing more.

Selling online does not change the £90,000 rule, but it can add obligations on top. If you sell through a marketplace you will need to give it your VAT number, and for some sales the marketplace accounts for the VAT instead of you. Those rules depend on where your stock and your customers are, so check VAT for businesses using an online marketplace before you price anything.

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How to register, and what HMRC asks a limited company for

You register online through HMRC's VAT Registration Service, signing in with your HMRC details or creating them on the way through. Before you start, have these to hand:

• your company registration number
• your business bank account details
• your Unique Taxpayer Reference
• your annual turnover
• an estimate of your taxable turnover for the next 12 months

You will also be asked about your Self Assessment, Corporation Tax, and PAYE (how to register). A handful of corporate cases still have to register by post on form VAT1, including a company registering its divisions under separate VAT numbers.

If you are weighing it up rather than committing, HMRC has a free VAT registration estimator that shows what registering would do to your prices and your margins.

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What happens after you apply, and what to do while you wait

HMRC posts you a nine-digit VAT number and confirmation of your effective date of registration. The number goes on every invoice you raise from then on.

The wait is the part worth planning for. On 20 October 2026, HMRC's own service quoted a reply by 17 November 2026 for an application sent that day, and said it was working through applications received on 14 September 2026 – about five weeks behind. HMRC asks you not to chase before 40 working days have passed, because doing so slows your own application down. Check the live estimate before you plan around it.

Meanwhile you are already VAT registered from your effective date, and you still cannot show VAT on an invoice without a number. The answer is to raise your prices by the VAT you will owe, invoice without showing a VAT line, and then reissue proper VAT invoices within 30 days of the number arriving. Tell the customer what you are doing and why; most finance teams have seen it before.

Once you have your number, set up your VAT online account, get MTD-compatible software in place, and work out when your first return is due. Our guide to how to submit your VAT return covers the mechanics. You may also be able to reclaim the VAT you paid before you registered – on goods you still hold bought up to four years earlier, and on services from the last six months.

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The first VAT bill is the one that catches companies out

The VAT you collect was never your money. It lands in your account with everything else and looks like revenue, and three months later HMRC wants its share of a quarter you have already spent. Companies that set it aside as it comes in find the first return uneventful. Companies that do not can find themselves short by a fifth of a quarter's sales.

So open a second account, or at least a savings pot, and move the VAT across as you invoice. Then make sure you know how and when to pay your VAT bill, because the payment has to reach HMRC by the deadline, not leave your account by it. If the money genuinely is not there, talk to HMRC before the deadline about spreading it rather than missing it, and read up on how VAT loans work if you are weighing up finance.

Sometimes the problem is not that the money is missing but that it is late. Customers on 30-day terms, a quarter that lands in a quiet month, an invoice that slips: the cash is coming, just not by the seventh of next month. That is a timing problem rather than a shortfall, and it bites hardest on companies with seasonal income or long payment terms. If a VAT bill is due before your cash comes in, an iwoca Flexi-Loan lets you pay it on time and repay early for free once your sales catch up.

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When you can cancel your registration

If your taxable turnover falls below £88,000, you can ask HMRC to cancel your registration. You do not have to, and plenty of companies stay registered to keep reclaiming input VAT. You must cancel within 30 days if you stop making taxable sales altogether.

Every figure on this page was checked against GOV.UK, legislation.gov.uk, or HMRC's live service on 20 October 2026. The Autumn Budget falls on 28 October 2026 and could change the thresholds, the penalties, or the rates, so check GOV.UK before you act on any of it. This is general information about how VAT registration works, not advice about your company – for that, speak to your accountant.