VAT is one of those taxes that sits comfortably in the background until your business hits a certain size. Then it becomes unavoidable, the rules get specific, and the cost of getting it wrong starts to add up.
For 2026/27, the registration threshold is still £90,000. The mechanics of how to register are the same as they’ve been for years, but a few things around the edges have changed.
Making Tax Digital is now mandatory for every VAT-registered business, the limited cost trader rule continues to catch a lot of service businesses on the Flat Rate Scheme, and HMRC can still charge late registration penalties based on the VAT due for the unregistered period and how late the registration is.
This guide covers when you have to register, the process itself, how to pick the right VAT scheme, and what you need to keep on top of once you’re in.
When You Have to Register
You must register for VAT in any of these situations:
- Your taxable turnover passes £90,000: Measured on a rolling 12-month basis, not by financial year. You have 30 days from the end of the month you crossed the threshold to notify HMRC.
- You expect to cross £90,000 in the next 30 days alone: A single large contract win can trigger this forward-look test even if your historic turnover is well below the threshold.
- You’re a non-established taxable person making taxable supplies in the UK: There is no VAT registration threshold, so registration can be required from the first taxable supply.
Taxable turnover means the total value of everything you sell that isn’t exempt. This includes standard-rated supplies (20%), reduced-rated supplies (5%) and zero-rated supplies (0%). Exempt supplies such as financial services, education and most insurance don’t count.
Two tests catch a lot of growing businesses:
- The rolling 12-month look-back: Most owners check turnover by financial year. HMRC checks every 12-month period ending at the end of each month. Your turnover for the year to 31 August might be £85,000, but the year to 30 September could be £92,000 – at which point you’ve crossed the threshold and need to act.
- The 30-day forward look: If you sign a contract that will take your turnover above £90,000 in the next 30 days, you’re required to register by the end of that 30-day period. Your effective registration date is the date you realised, not the date the turnover actually goes over.
If you’re temporarily over the threshold – a one-off project or a seasonal spike – you can apply for an exception to registration. HMRC will only grant it if you can show your taxable supplies are expected to stay below the deregistration threshold of £88,000 in the next 12 months.
Missing the deadline can be expensive. The standard late registration penalty is 5%, 10% or 15% of the VAT due for the unregistered period, depending on whether registration is less than 9 months late, between 9 and 18 months late, or more than 18 months late, with a £50 minimum.
You’ll also need to pay over the VAT on sales you made after the threshold was crossed, even if you didn’t charge VAT to those customers at the time.
Voluntary Registration
You don’t have to wait for the threshold. Any UK business making taxable supplies can register voluntarily below £90,000.
The case for voluntary registration is strongest when:
- Your customers are mostly VAT-registered businesses: They can reclaim the VAT you charge, so your prices don’t go up from their point of view.
- You have significant input VAT to reclaim: Equipment, software, professional services or stock with VAT on them.
- You’re approaching the threshold anyway: Registering early avoids the scramble.
- You sell zero-rated goods or services: You charge 0% VAT but can still reclaim VAT on your costs – a net cash benefit.
The case against is mainly about pricing. If your customers are end consumers or non-VAT-registered businesses, adding 20% to your prices can hurt sales. A hairdresser, café or small retail business serving the public will usually be worse off voluntarily registered.
The Registration Process
Registering for VAT is straightforward in most cases. The vast majority of registrations are done online through HMRC’s Government Gateway service.
Before you start, gather:
- Business details: Trading name, registered address, business activity description, and your Companies House number if you’re a limited company.
- Turnover information: Your current taxable turnover and the date you crossed the threshold (or expect to).
- Bank account details: For VAT refunds and direct debits.
- Personal identification: UTR, National Insurance number and ID documents for the registering individual.
The application itself is a single form. Most straightforward applications are processed within a few weeks, but timings vary and more complex applications can take longer.
You’ll get a VAT registration certificate showing your nine-digit VAT number, your effective registration date, and the deadline for your first return.
Until your VAT number arrives, you should not issue VAT invoices showing VAT separately. But VAT is still due on taxable sales from your effective registration date, so either delay invoicing where possible or issue invoices that make clear VAT will be added later and reissue proper VAT invoices once the number is through.
There’s no fee to register. The only ongoing cost from HMRC’s side is for MTD-compatible software, which typically runs £15–£40 a month for small businesses.
Choosing a VAT Scheme
Four schemes are worth knowing about. Picking the right one can change your cash flow and admin load substantially.
Standard VAT Scheme
The default. You charge VAT on your sales, reclaim VAT on your purchases, and pay HMRC the difference each quarter.
This works for most businesses and is the most flexible option. You account for VAT on the invoice date, which means you can owe HMRC VAT on sales your customer hasn’t yet paid you for.
Flat Rate Scheme
You pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC, rather than tracking VAT on individual transactions. The percentage depends on your sector – IT consultants pay 14.5%, catering businesses 12.5%, and so on.
A few details that catch people out:
- The £150,000 entry limit: Available to businesses expecting taxable turnover of £150,000 or less. You must leave the scheme if turnover exceeds £230,000.
- The 1% first-year discount: New entrants get a 1% reduction on their flat rate for the first year of VAT registration.
- The limited cost trader rule: If your business spends less than 2% of turnover, or less than £1,000 a year where that is higher, on relevant goods, you pay 16.5% regardless of sector – which usually wipes out the scheme’s benefit.
- Limited input VAT recovery: You generally can’t reclaim VAT on purchases, except for certain capital assets over £2,000.
The Flat Rate Scheme can suit businesses with simple VAT affairs, but low-overhead service businesses need to watch the limited cost trader rule carefully – it often catches the businesses the scheme initially looks attractive to. For anyone with significant input VAT, the standard scheme usually works out better.
Cash Accounting Scheme
You account for VAT when money moves, not when invoices are issued. If a customer doesn’t pay, you don’t owe HMRC the VAT on that invoice.
The Cash Accounting Scheme is available up to a turnover of £1.35 million, and you must leave at £1.6 million. It’s a clear win for businesses dealing with late-paying customers or long payment terms.
The trade-off is that you can’t reclaim VAT on purchases until you’ve paid your suppliers – not usually a problem, but worth understanding.
Annual Accounting Scheme
You submit one VAT return a year instead of four, with interim payments made through the year based on an estimate. The Annual Accounting Scheme is available where estimated taxable turnover is £1.35 million or less, and you generally have to leave if turnover exceeds £1.6 million.
This suits businesses with steady, predictable turnover and a preference for less frequent paperwork. It’s less useful for businesses that regularly reclaim VAT, since refunds normally only arrive once a year when the annual return is filed.
Some schemes can be combined – Flat Rate with Annual Accounting is a common example – but not every combination is available, so check the rules before switching.
After You Register
Once you have a VAT number, you’ll need to:
- Charge VAT on taxable sales: Standard rate 20%, reduced rate 5%, or zero rate 0%, depending on what you sell.
- Issue VAT invoices: Showing your VAT number, the VAT rate applied, and the VAT amount.
- Keep digital records: Making Tax Digital for VAT is mandatory for every VAT-registered business. Records must be kept in MTD-compatible software, with VAT returns submitted directly to HMRC through that software.
- Submit VAT returns: Usually quarterly, with the return and payment due one calendar month and 7 days after the end of the VAT period. Payments are usually due by the same deadline, so allow time for the payment to reach HMRC.
A few common slip-ups to avoid:
- Forgetting the reverse charge: Construction Industry Scheme work between VAT-registered businesses uses the domestic reverse charge. Other situations have their own rules.
- Mixing partial exemption with normal reclaim: If you make both taxable and exempt supplies, you can only reclaim input VAT proportionally – the calculations get fiddly.
- Missing the deregistration trigger: If your taxable turnover drops below £88,000 and is likely to stay there, you can deregister. Some businesses miss this and keep filing returns long after they could have stopped.
Our VAT Returns service and bookkeeping support cover the ongoing compliance side, from quarterly filings to scheme reviews and exception applications.
How Double Point Can Help
VAT registration looks simple on paper. In practice, picking the wrong scheme, missing the rolling threshold, or fumbling the MTD setup can cost a business thousands a year that didn’t need to be spent.
At Double Point, our chartered accountants handle VAT registration for businesses across the UK – assessing whether you need to register, picking the scheme that fits, and managing the ongoing returns and compliance.
Book a free consultation and we’ll work out your VAT position for 2026/27 and the cleanest way to handle it.