What is the VAT registration threshold in the UK?
The VAT registration threshold is the turnover level at which businesses in the UK must register for VAT. For the 2024-25 tax year, this threshold is set at £90,000. This represents the amount of taxable income your business can earn before VAT registration becomes mandatory.
Whether you’re self-employed or operating through a limited company, understanding the VAT registration rules and monitoring your taxable turnover is crucial. This post explains everything you need to know, including how and when to register for VAT if required.
The VAT registration threshold 2024-25
The UK VAT registration threshold determines when businesses making taxable supplies or relevant acquisitions must register for VAT (Value Added Tax). On 1 April 2024, the threshold increased from £85,000 to £90,000 per year and will remain at this level until at least the end of the 2024-25 tax year.
As a business owner, you are legally required to register for VAT in the UK if either of the following conditions is met:
- At the end of any month, your taxable turnover for the past 12 months exceeds the current VAT threshold.
- At any time, you expect your taxable turnover to exceed the VAT threshold in the next 30 days alone.
Taxable turnover is the total value of the goods or services you sell in the UK that are not VAT-exempt or outside the scope of VAT. When you sell or supply taxable goods or services in the course of business, you are making “taxable supplies.”
Acquisitions VAT threshold in Northern Ireland
The VAT registration threshold for acquisitions into Northern Ireland is £90,000 for the current tax year.
If your business is based in Northern Ireland and buys goods from VAT-registered EU suppliers, you must register for VAT if either of the following conditions is met:
- At the end of any month, the total value of relevant acquisitions from 1 January has exceeded the registration threshold.
- It is reasonable to assume that the value of relevant acquisitions in the next 30 days alone will exceed the registration threshold.
This requirement applies even if your business only sells VAT-exempt or “out of scope” goods in Northern Ireland, but it does not apply to the purchase of services.
Distance selling to or from Northern Ireland
The current VAT registration threshold for distance selling to or from Northern Ireland is £8,818. You must register for VAT in the UK if all the following conditions are met:
- Your business is based in an EU Member State.
- You supply and deliver goods to customers in Northern Ireland.
- The total value of those sales exceeds the distance selling VAT threshold at any time during the calendar year from 1 January.
If your business is based in Northern Ireland and you sell goods to consumers in the EU, you must register for VAT in EU countries when the total value of those distance sales exceeds £8,818.
When the VAT Registration Threshold Doesn’t Apply
If you make distance sales of excise goods, such as tobacco or alcohol, into the UK, you must register for VAT regardless of the value of those sales.
The UK VAT threshold also does not apply if you meet all the following conditions:
- You are based outside the UK.
- Your business is based outside the UK.
- You make taxable sales of goods or services in the UK or expect to do so in the next 30 days.
In this situation, you are considered a “non-established taxable person” (NETP) for UK VAT purposes and must register for VAT regardless of your turnover level.
What are taxable supplies?
Taxable supplies are any goods or services you provide in the UK, excluding those that are VAT-exempt or “out of scope.” They include:
- Goods you sell that are taxed at the standard, reduced, or zero rate of VAT
- Goods you hire out or lease to customers
- Business goods you use for personal reasons
- Goods you give away, part-exchange, barter, or offset
- Services you receive from overseas businesses that require a “reverse charge“
- Goods and services subject to the “domestic reverse charge“
- Building work over £100,000 that your business undertakes for itself
For VAT purposes, the total value of your taxable supplies determines your taxable turnover.
How to calculate your taxable turnover
Your taxable turnover determines both your obligation to register for VAT and your eligibility to cancel your VAT registration.
As a business owner, it’s essential to monitor your taxable turnover on a rolling 12-month basis, rather than by the calendar year, tax year, or financial year covered by your annual accounts.
In practice, this means calculating the value of your taxable supplies for the past 12 months at the end of each month. If your taxable turnover exceeds £90,000 at the end of any 12-month period, you must register for VAT.
What’s the deadline for compulsory VAT registration?
If you exceed the VAT registration threshold or realize you are about to, you will have at least 30 days to register for VAT. The exact timeframe depends on your specific situation.
Scenario 1: You’ve exceeded the VAT threshold in the past 12 months
If your total VAT-taxable turnover for the past 12 months exceeds £90,000, you must register within 30 days of the end of the month in which you exceeded the threshold.
Your “effective date of registration” for VAT will be the first day of the second month after you exceed the threshold.
For example:
- On 25 July, your turnover for the past 12 months reaches £91,000.
- This is the first time your turnover has exceeded the VAT threshold in any 12-month period.
- You are legally required to register for VAT on or before 30 August.
- Your effective date of registration will be 1 September.
Scenario 2: You are going to exceed the threshold in the next 30 days
If you realize that your total VATable turnover for the year will exceed the £90,000 threshold in the next 30 days, you must register by the end of those 30 days.
Your effective registration date will be the date you realized this would happen, not when your turnover actually exceeds the threshold.
For example:
- On 1 October, you secure a new contract for services worth £91,000.
- The client will pay you by the end of October.
- You must apply for VAT registration by 30 October.
- Your effective date of registration will be 1 October.
Other scenarios: distance sales, relevant supplies, and NETPs
- If the value of your distance sales exceeds the threshold, register within 30 days of this occurrence.
- When you make relevant supplies, register within 30 days of making the supply.
- If you believe you will make a relevant supply in the next 30 days, register before the end of those 30 days.
- If you are a non-established taxable person (NETP) and make taxable supplies in the UK of any value, register within 30 days of making the supply.
- If you are a NETP and expect to make taxable supplies in the UK in the next 30 days, register within 30 days of when that expectation arises.
What happens if your turnover goes over the threshold temporarily?
You can apply to HMRC for a registration “exception” if your VATable turnover temporarily exceeds the threshold. This might happen for various reasons, such as:
- Receiving unusually large orders from one or more customers
- Completing a large contract on a one-off basis
- Experiencing a sudden increase in sales due to marketing or seasonal fluctuations
To apply, request the VAT1 registration form from HMRC. When returning the form, include evidence that your taxable turnover will not exceed the VAT deregistration threshold of £88,000 again in the next 12 months.
If you receive an exception, HMRC will confirm it in writing. If not, they will register you for VAT.
Exemption from VAT registration
You may be exempt from VAT registration if most of your taxable supplies are zero-rated, meaning they have a VAT rate of 0%. If you are a non-established taxable person (NETP), you are eligible for exemption from registration if you sell only zero-rated goods or services.
You can apply for VAT exemption in two ways:
- Online: Use HMRC’s online VAT registration service.
- By post: Contact HMRC to request the VAT1 registration form.
To complete the application, provide information about your business, including the estimated value of your zero-rated supplies over the next 12 months.
HMRC will notify you in writing if your application for exemption is approved. If it’s rejected, they will register you for VAT.
VAT accounting scheme thresholds
In addition to the VAT registration threshold, you may need to consider other thresholds for certain VAT accounting schemes. Several optional schemes are available that allow eligible businesses to manage their VAT accounting in various ways.
Flat Rate Scheme threshold
The VAT Flat Rate Scheme is designed to simplify record keeping and help manage cash flow. It allows you to pay HMRC a fixed rate of VAT, which is lower than the standard rate.
You keep the difference between the VAT you charge customers and what you pay to HMRC. However, you cannot reclaim VAT on purchases, except for certain capital assets over £2,000.
To join the Flat Rate Scheme, your estimated taxable turnover for the next year must be £150,000 or less. If your turnover exceeds £230,000, you must leave the scheme.
Cash Accounting Scheme threshold
The VAT Cash Accounting Scheme allows you to pay VAT on your sales (output tax) when your customers pay you, rather than when you invoice them. Similarly, you can only reclaim VAT on your business purchases (input tax) when you pay your suppliers, not when they invoice you.
To join the Cash Accounting Scheme, your estimated taxable turnover for the next year must be £1.35 million or less. If your turnover exceeds £1.6 million, you must leave the scheme.
Annual Accounting Scheme VAT threshold
Under the VAT Annual Accounting Scheme, businesses submit only one VAT return each year and make advance payments toward their VAT bill. Typically, businesses submit a return every three months and pay their VAT bill at the same time.
To join the Annual Accounting Scheme, your estimated taxable turnover for the next year must be £1.35 million or less. If your turnover exceeds £1.6 million, you must leave the scheme.
How to register for VAT in the UK
You can apply for VAT registration with HMRC either online or by post. The process is largely the same whether you are registering as a limited company, partnership, individual (e.g., sole trader), or non-established taxable person.
To register online, sign in to your HMRC account using your Government Gateway user ID and password. If you don’t have an account, you can create one as a new user.
Next, you will need to answer a series of questions about your business, including why you are applying for VAT registration. You will then provide information about yourself and your business, including (where applicable):
- Company registration number
- Primary place of business (i.e., your registered office address or business address)
- Description of business activities
- Unique Taxpayer Reference (UTR) for your company or partnership
- Personal details, including your name, address, date of birth, National Insurance number, and individual (personal) UTR
- Details of annual turnover
- An identity document (e.g., passport or driving license)
- The date on which you exceeded or expect to exceed the threshold
When registering a partnership for VAT, you must also complete form VAT2 to provide details of each partner and upload it to your application.
If online registration is not possible, you can register for VAT by post using the VAT1 paper form.
After registration
If HMRC accepts your application, you should receive the following information by post within 30 days:
- Your VAT certificate, including your unique 9-digit VAT registration number
- Guidance on setting up your business tax account (if you don’t have one already), which you’ll need to access HMRC’s VAT online service
- Information about when to submit your first VAT return and payment
- Confirmation of your VAT registration date, known as your “effective date of registration”
Once you receive this information, you must sign up for a VAT online account. Follow these simple steps to do so:
- Sign in to Government Gateway with your user ID and password
- Click on ‘Business tax account’ from the menu bar along the top
- Select ‘add a tax, duty, or scheme’ – it may appear as ’get online access to a tax, duty, or scheme’ if you’re signed up for other taxes already
- Select ‘VAT and VAT Services’
- Choose which services you want to add
- Enter your VAT number
- Provide the date you became VAT-registered – this is shown on your certificate
- Enter the UK postcode where your business is registered for VAT
You will use this account to manage your VAT affairs, including viewing your outstanding balance and paying VAT bills. If you use the Annual Accounting Scheme, you can also submit your VAT return through your online account.
Can I register for VAT if my turnover is below the threshold?
Small businesses with taxable turnover below the VAT registration threshold can apply for voluntary VAT registration. The application process is the same as described above.
Voluntarily registering for VAT allows your business to reclaim VAT on purchases, attract VAT-registered clients, and enhance its profile and credibility.
What is the VAT deregistration threshold?
The VAT deregistration threshold for the 2024-25 tax year is £88,000 (or £90,000 if your business is in Northern Ireland). If your taxable turnover falls below the applicable threshold, or you know it will, you can apply online to cancel your VAT registration.
However, deregistration is optional, and you can remain registered for as long as you like. Deregistration is only compulsory when a business is no longer eligible to be VAT-registered, such as if it ceases trading or stops making taxable supplies.
Do you have any other questions?
We’ve covered the details of the VAT registration threshold in the UK. As of 2024, businesses must register for VAT when their taxable turnover exceeds £90,000 over a 12-month period. This threshold applies to both goods and services that are not VAT-exempt. Keeping track of taxable turnover is crucial to ensure timely VAT registration and avoid penalties.
So for more information, visit the Startxpress Help Center and Blog. If you need assistance, contact us at support@startxpress.io!
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