VAT registration – when should you register for VAT? Try HMRC’s estimator tool

If the ‘taxable supplies’ of your business over the past 12 months have exceeded the current VAT registration threshold, you must register for VAT.

The current registration threshold (as of April 2026) is £90,000.

This means that, at the end of any given month, if the total value of all your taxable supplies over the previous 12 months has met the £90,000 threshold, you should register for VAT.

The term ‘taxable supplies’ refers to any goods and services subject to VAT at any rate, including zero-rated supplies. Your taxable supplies will usually equal your turnover.

Importantly, you should also register your business for VAT if you expect your annual turnover to exceed £90,000 in the next 30 days.

HMRC’s VAT Registration Estimator

HMRC hosts a useful VAT registration estimator tool to help you work out the impact of registering on your sales and accounts.

HMRC, which records over 300,000 VAT registrations recorded each year, says that it created the tool in response to feedback from small businesses.

Many sole traders worry about how registering for VAT will affect their customers, who will have to absorb price increases (if they can’t reclaim the VAT themselves).

The estimator shows the effect of registration on both your sales and expenses.

You can adjust your inputs, apply different VAT rates, and decide whether to absorb or add VAT to your selling prices.

Try the VAT registration estimator

Seeking permission not to register for VAT

If your business has crossed the VAT registration threshold but you believe this will only be temporary, you can seek permission not to register.

You must write to the HMRC explaining your reasons for doing so, including why your turnover won’t exceed the current de-registration threshold (currently £88,000).

If your request is successful, you may need to register in the future if your turnover nears the threshold and you no longer have mitigating reasons to delay registration.

The VAT threshold dilemma

Although the registration threshold historically exists to prevent smaller traders from having to charge VAT on their supplies, it can also act as a disincentive to business expansion.

Many sole traders and small business owners deliberately stay just below the £90,000 limit to avoid extra reporting requirements, potential accountancy fees, and price increases for customers.

If you cross the threshold, you will usually have to increase prices to fully take into account the extra VAT, accept lower margins by absorbing some of the extra costs, or lose non-VAT-registered customers entirely.

Some small traders even refuse additional work as they near the 12 month threshold.

You can read more about the issues the VAT registration threshold creates here:

VAT registration threshold – why it holds some businesses back.

Voluntarily registering for VAT may be beneficial

Even if you don’t have a legal requirement to register (i.e. your annual turnover hasn’t exceeded the VAT threshold), you may voluntarily decide to register for VAT.

If you are VAT-registered, you can claim back the VAT you’ve paid on any business purchases.

If your sales comprise zero-rated goods or services and you purchase standard-rated items, you can claim a VAT refund from HMRC. Even if you haven’t made any sales, you can still claim the VAT back on your purchases.

If you register voluntarily, you might even be able to reclaim some of the VAT you paid when you set up your business, even though you weren’t VAT-registered at the time.

You should check the rules for reclaiming VAT on purchases made before registration on the HMRC website here.

Another potential benefit of being VAT-registered is that it may give the impression that you run a larger company than you actually do, which can enhance your image with clients.

You can read about the VAT registration process in detail at the HMRC site here. You can also register online.

Alongside the “standard” VAT scheme, if you are starting a new business, you should also consider registering for the Flat Rate VAT Scheme.

This can offer a more straightforward VAT process and, depending on your business circumstances, some financial benefits.