VAT Registration for Small Business: How the £90,000 Threshold Works in 2026/27

If you're a sole trader, freelancer or small business owner, one of the most important numbers to track isn't your profit — it's your rolling 12-month turnover. For the 2026 to 2027 tax year, the VAT registration threshold remains £90,000, unchanged from the prior year, according to Numeric Accounting's guide.

How the threshold actually works

VAT registration isn't based on your turnover in a single tax year or calendar year — it's a rolling 12-month test. At the end of every month, you need to add up your taxable turnover for the previous 12 months. If that total goes over £90,000, you must notify HMRC within 30 days and register for VAT, even if you expect turnover to dip back below the threshold later.

There's also a forward-looking test: if you expect your turnover to exceed £90,000 in the next 30 days alone (say, from a single large contract), you must register immediately, not wait for the rolling 12-month figure to catch up.

What changes once you're VAT registered

• You must charge VAT (usually 20%) on your taxable sales and pay it to HMRC.
• You can reclaim VAT on most business purchases and expenses.
• You must keep digital records using HMRC-compatible software — from 1 April 2026, this is a requirement for all VAT-registered businesses, not just those already using Making Tax Digital.
• You'll need to file VAT returns, typically quarterly, through MTD-compatible software.

Checklist: staying on top of VAT registration

• Track your rolling 12-month turnover monthly, not just at your accounting year-end — a single strong month can tip you over unexpectedly.
• Register within 30 days of crossing the threshold to avoid penalties for late registration.
• Consider voluntary registration below the threshold if most of your customers are VAT-registered businesses that can reclaim the VAT you charge — this lets you reclaim VAT on your own costs without the downside of raising prices to consumers.
• Set up MTD-compatible software before you register, since digital record-keeping is mandatory from day one for new registrations.
• Factor VAT into your pricing ahead of time if most of your customers are individual consumers who can't reclaim it — a 20% VAT charge can materially affect your competitiveness if you haven't planned for it.
• Watch for the charity donation VAT relief introduced from 1 April 2026, if your business donates goods to charity.

Business structure matters too

Note that VAT registration is separate from the choice between operating as a sole trader or limited company — the £90,000 threshold applies to the business's taxable turnover regardless of legal structure.

International comparison

The UK's £90,000 VAT threshold is unusually generous by international standards. The EU's common VAT rules generally set much lower small-business exemption thresholds, often in the €25,000–€85,000 range depending on the member state, while Australia's GST registration threshold sits at AUD $75,000. The US has no federal VAT/sales tax equivalent — sales tax registration rules are set state-by-state and often have no turnover-based exemption at all.

Key Numbers

• VAT registration threshold 2026/27: £90,000
• Notification deadline after crossing threshold: 30 days
• Digital record-keeping mandatory from: 1 April 2026
• Standard UK VAT rate: 20%
• Australia's GST threshold: AUD $75,000

Sources

• Numeric Accounting: VAT registration guide 2026 to 2027
• GOV.UK: VAT registration
• RSBC: UK VAT Guide 2026
• Sleek: sole trader vs limited company tax comparison 2026

Educational content only — not financial advice.