UK VAT Registration 2026/27: When You Must Register and What Happens Next

What Is VAT and Why Does Registration Matter?

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. As a VAT-registered business, you charge VAT on your sales (output tax), reclaim VAT on your purchases (input tax), and pay the difference to HMRC -- usually every quarter.

Registration is not optional once you hit the threshold. Failing to register on time exposes you to penalties that can amount to a percentage of the VAT you should have paid. Understanding exactly when and how to register is therefore critical for any growing UK business.

The 2026/27 VAT Threshold

The £90,000 threshold has been in place since April 2024 and applies throughout 2026/27. It is one of the highest VAT registration thresholds in the world.

The Rolling 12-Month Test

The most important thing to understand is that the threshold is tested on a rolling 12-month basis, not a tax year or calendar year basis.

At the end of every calendar month, look back at the previous 12 months. If your cumulative taxable turnover over those 12 months has exceeded £90,000, you have a registration obligation.

Example

• June 2025 to May 2026: total taxable turnover = £88,500 -- below threshold, no action needed
• July 2025 to June 2026: total taxable turnover = £91,200 -- threshold exceeded

In the second scenario, you exceeded the threshold by the end of June 2026. You must notify HMRC by 31 July 2026 and your effective VAT registration date will be 1 August 2026.

The Future Test

There is a second trigger that many business owners overlook: the future test. If at any point you have reasonable grounds to believe that your taxable turnover in the next 30 days alone will exceed £90,000, you must register immediately -- even if you have not yet exceeded the rolling 12-month test.

This typically applies to businesses that win a large contract or make a one-off large sale. The registration must take effect from the start of that 30-day period.

What Counts as Taxable Turnover?

Taxable turnover includes:

• Sales of standard-rated goods and services (20%)
• Sales of reduced-rated goods and services (5%)
• Zero-rated sales (0%)

It does not include:

• Exempt supplies (e.g. insurance, financial services, most residential property lettings)
• Sales of capital assets used in the business (in most cases)
• Outside-the-scope supplies

If your business makes only exempt supplies, you generally cannot register for VAT -- and therefore cannot reclaim input VAT.

How to Register for VAT

Registration is done online through your HMRC Government Gateway account. You will need:

1. Your business name and address
2. Your business structure (sole trader, partnership, limited company)
3. The date you exceeded -- or expect to exceed -- the threshold
4. Details of the business activities and SIC code
5. Bank account details for repayment purposes
6. Details of any VAT group or business transfers if applicable

HMRC will issue a VAT registration number (9 digits, usually in the format GB XXX XXXX XX) and a VAT certificate. Keep the certificate -- your customers may ask to see it.

What Happens on Your VAT Registration Date

From your effective registration date, you must:

• Charge VAT on all taxable supplies at the correct rate
• Issue VAT invoices to VAT-registered customers (they need them to reclaim input tax)
• Keep VAT records including a VAT account (often called a VAT ledger)
• File VAT returns -- usually quarterly, though monthly or annual schemes are available
• Pay any VAT due by the deadline (usually 1 calendar month and 7 days after the end of each VAT period)

Making Tax Digital for VAT

All VAT-registered businesses must keep digital records and file returns using Making Tax Digital (MTD)-compatible software. This has applied to all VAT registrations since April 2022. You cannot use HMRC's older online filing portal for standard returns.

Voluntary VAT Registration

You can register voluntarily at any time, even if your turnover is below £90,000. Reasons to consider this include:

• Reclaim input VAT -- if you make large purchases or investments early in the business, you can reclaim the VAT on those costs
• Look more established -- a VAT number can signal credibility to B2B customers
• Simplify trading with VAT-registered customers -- they can reclaim the VAT you charge, so it is cost-neutral for them

The downside: you must charge VAT to customers who cannot reclaim it (typically consumers and exempt businesses), which effectively raises your prices by 20% unless you absorb the cost.

Penalties for Late Registration

HMRC charges a failure-to-notify penalty based on the VAT you should have paid from the date you should have registered:

The minimum penalty is £50. Late registration also means you owe all the VAT you should have charged from the registration date, even if you did not collect it from customers. Chasing customers retrospectively for VAT is difficult and often impossible.

Deregistration: When and How

You can deregister from VAT if:

• Your taxable turnover has fallen below £88,000 in the past 12 months and you expect it to remain there
• You can satisfy HMRC that your taxable turnover in the next 12 months will not exceed £90,000
• You cease making taxable supplies (you stop trading or move entirely to exempt activities)

To deregister, complete form VAT7 online through your Government Gateway account. The effective deregistration date is agreed with HMRC -- typically the date you applied or a future date.

Final VAT Return

On deregistration, you must account for VAT on any business assets you hold that were above a certain value when you claimed input tax. This is known as a deemed supply and can catch businesses off guard if they hold significant stock or equipment.

VAT Schemes for Small Businesses

Once registered, you may be eligible for simplified VAT accounting schemes:

Flat Rate Scheme

Pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC instead of calculating input and output VAT separately. Available if your expected taxable turnover is under £150,000 (excluding VAT). The flat rate varies by trade sector (typically 4%--14.5%).

Cash Accounting Scheme

Account for VAT on the basis of payments received and made, rather than invoices issued. Helps with cash flow and bad debt. Available if your taxable turnover is under £1.35 million.

Annual Accounting Scheme

File one VAT return per year (instead of quarterly) and make monthly or quarterly advance payments based on the previous year's VAT liability. Available if your taxable turnover is under £1.35 million.

Summary

The UK VAT registration threshold for 2026/27 is £90,000 on a rolling 12-month basis. If you exceed it, you have 30 days to notify HMRC and your registration takes effect from the first day of the following month. Penalties for late registration can be severe, so monitor your turnover monthly. Whether you register voluntarily or compulsorily, MTD-compatible software is mandatory from day one.