What is the VAT registration threshold?

The VAT registration threshold is the level of turnover at which a business must register for VAT.

For the 2025/26 tax year:

• Registration threshold: £90,000
• Deregistration threshold: £88,000

These thresholds increased from £85,000 and £83,000 in April 2024 — the first change since 2017.

The government has confirmed that these new thresholds will be frozen, although no end date has been specified.

When do you need to register?

You must register for VAT if:

• Your taxable turnover exceeds £90,000 in any rolling 12-month period, or
• You expect to exceed £90,000 in the next 30 days alone

You must register within 30 days of the end of the month in which you exceed the threshold.

What is taxable turnover?

Taxable turnover includes:

• Standard-rated sales (20%)
• Reduced-rated sales (5%)
• Zero-rated sales

It does not include:

• VAT-exempt income (e.g. residential rent, certain financial services)

Can you deregister?

Yes — you can deregister if:

• Your taxable turnover falls below £88,000, and
• You expect it to remain below this level

Planning opportunities

With the threshold now at £90,000, businesses should:

• Monitor turnover regularly
• Consider timing of invoices
• Plan growth to avoid unexpected VAT registration

Voluntary registration may still be beneficial if:

• Your customers are VAT registered
• You incur significant VAT on costs

HMRC monitoring

HMRC actively monitors businesses that may need to register for VAT.

It uses data from:

• Payment providers
• Suppliers and wholesalers
• Tax returns and third-party data

If HMRC believes you should be registered, it may contact you and request action.

Private hire vehicles – VAT update

A recent High Court case involving Uber has created uncertainty around the VAT treatment of private hire vehicles.

As a result:

• The government launched a consultation in April 2024
• The aim is to assess the impact on the sector and passengers
• Further changes to VAT rules for private hire operators may follow

Businesses in this sector should keep this area under review, as changes could significantly affect pricing and VAT obligations.

Common mistakes to avoid

• Monitoring turnover annually instead of on a rolling 12-month basis
• Forgetting to include all taxable income
• Delaying VAT registration
• Not reviewing whether voluntary registration is beneficial

Final thoughts

The increase in the VAT threshold to £90,000 provides more flexibility for small businesses, but it remains essential to monitor turnover closely.

With HMRC using more data than ever, failing to register on time can result in significant costs.

Action point:
Regularly review your turnover and consider whether VAT registration — compulsory or voluntary — is appropriate for your business.