As at the 2025/26 tax year, the VAT registration threshold is £90,000 – increased from £85,000 on 1 April 2024 – and the deregistration threshold is £88,000. (HMRC, 2024). For many growing businesses, that tiny £2,000 gap and the rolling nature of the test create a real dilemma: do you register for VAT at £90,000 the moment you get close, or hold off (legally) for as long as you can? This post explains the rule change, weighs the cash impact of reclaiming input VAT against the extra admin and pricing conversations you’ll need to have, and shows you how to forecast turnover accurately so you are not forced into a backdated, penalty‑laden registration. We work with clients nationwide, fully online, so if you want us to run the numbers with you – we’ve got this.
The key question is rarely a simple “register or don’t”. It’s really: what’s the net cost (or benefit) to my business if I register now versus later? That answer depends on who your customers are (B2B or B2C), how much VAT you incur on costs, your margins, your pricing power, and how confident you are in your sales pipeline over the next 30 days and the next 12 months. Get those projections wrong and HMRC can (and will) backdate your registration to the day you crossed the line, meaning sudden VAT bills on past sales, interest and potential penalties. (HMRC, 2024).
Below, we walk through the decision points – with practical steps you can take today to stay compliant and protect cashflow.
Why the April 2024 threshold rise matters
The lift to £90,000 gives many small businesses a little extra headroom, but not a free pass. The deregistration threshold also moved to £88,000, keeping a £2,000 “anti‑churn” buffer so businesses cannot hop in and out of VAT on tiny fluctuations. (HMRC, 2024). If you were bumping against £85,000 before, you may have temporarily slipped back to safety – but if your growth trajectory continues, you still need a plan.
VAT at £90,000 – when do you have to register?
Two tests apply:
- Rolling 12‑month look‑back: The moment your taxable (i.e. VATable) turnover for the last 12 months goes over £90,000, you must register. You have 30 days from the end of the month in which you crossed the line to tell HMRC; your effective date of registration is typically the first day of the second month after you exceeded the threshold.
- 30‑day look‑forward: If you know you will exceed £90,000 in the next 30 days alone (for example, you’ve signed a big contract), you must register immediately, with the effective date being the date you realised this would happen.
Miss the deadline and HMRC can backdate, creating an instant liability to pay VAT on sales you already made – without having charged your customers – plus interest and penalties.
The upside: Reclaiming input VAT
Registering unlocks the ability to reclaim VAT on your costs. That can be significant if you:
- Buy capital equipment or software licences with 20% VAT attached
- Subcontract to other VAT‑registered businesses and pay VAT on their invoices
- Import goods and pay import VAT
Example (simplified): You spend £12,000 + VAT (£2,400) on equipment. If you are registered, you reclaim the £2,400, immediately improving your cash position. If you stay unregistered, that £2,400 is a hard cost and erodes your margin. Over a year, these recoveries can outweigh the perceived hassle of filing quarterly returns.
There’s also the pre‑registration VAT rule – you can often reclaim VAT on goods you still hold (up to four years back) and on services received in the six months before registration, provided the usual conditions are met.
The downside: Admin time, cashflow and pricing
Registration brings admin and process changes:
- Digital records and Making Tax Digital submissions: Quarterly returns, digital links, proper invoice wording and sequential VAT invoice numbers.
- Cashflow impact: If your customers are mainly consumers, adding 20% to your prices could hurt demand. Absorbing VAT instead drops your margin. Either way, your cashflow model changes.
- Surcharges and penalties risk: Late filings and payments quickly get expensive.
Ask yourself:
- Are most of your customers VAT‑registered (so they can reclaim your VAT)? If yes, the pricing impact is minimal.
- Do you incur meaningful VAT on costs? If yes, reclaiming might make early registration a net gain.
- Do you have the systems (or an accountant) to handle the extra compliance smoothly? If not, factor in the time or fee cost.
Forecasting turnover so you do not get caught out
You need a rolling 12‑month tracker – not a financial year tracker. Build a simple but disciplined process:
- Create a rolling total: A spreadsheet or accounting software report that always shows your last 12 months’ taxable turnover, updated monthly (weekly if you are close to £90,000).
- Layer in a 30‑day forward view: Add signed contracts, proposals likely to convert, and seasonal spikes. If the next 30 days alone will tip you over, act immediately.
- Segment zero‑rated and exempt sales: Only taxable turnover counts towards the £90,000, so separate those figures clearly.
- Stress‑test scenarios: Price rises, one‑off projects, or a new product launch can all accelerate you past the line.
- Document your rationale: If you decide not to register yet, keep evidence of forecasts and calculations – it will help if HMRC ever asks.
Need a model you can drop your numbers into? Get in touch with us and we’ll share the rolling VAT tracker we use with clients.
Voluntary registration below £90,000: When it still makes sense
Sometimes registering before you are forced to is the smart play:
- B2B client base: If your customers can reclaim VAT, charging it is neutral for them – and you get your input VAT back.
- Heavy upfront investment: Planning a rebrand, a new office fit‑out, or a big equipment purchase? Early registration recovers 20% of those costs.
- You will cross soon anyway: Registering now avoids messy backdating, surprise VAT bills and awkward “we now need to charge you VAT on that past work” conversations.
- Flat Rate Scheme optimisation: Depending on your sector and margin, the Flat Rate Scheme can simplify admin and sometimes reduce the effective VAT you pay. (Speak to us – the detail matters.)
If you go the other way and your taxable turnover drops below £88,000, you can apply to deregister – but think through the knock‑on effects on pricing and the potential need to repay VAT on certain assets.
Ready to decide? We can run the numbers with you
Whether you are comfortably under, hovering around, or already over VAT at £90,000, the best decision is the one backed by solid forecasts, a cashflow model and a clear compliance plan. We’ll help you build (or sanity‑check) your rolling 12‑month turnover tracker, project the next 30 days, and model the cash impact of registering now versus waiting. We’ll also check whether schemes such as cash accounting or the Flat Rate Scheme reduce the admin or the cost, assess what you can reclaim pre‑registration, and set you up with Making Tax Digital compliant software so quarterly submissions are painless.
If you sell mainly to VAT‑registered businesses, we can show you – in pounds and pence – how voluntary registration could actually improve cashflow. If you’re B2C, we’ll help you decide whether to reprice, absorb VAT, or restructure your offer so margins stay healthy. And if you’ve already tripped the threshold, we’ll handle the registration, tidy the bookkeeping, prepare any backdated returns and minimise penalties where possible.
Everything we do is online, so you get fast answers, clear recommendations and ongoing support wherever you are in the UK. Talk to us about VAT at £90,000 and let us run the analysis, implement the right scheme and keep you compliant – so you can focus on growing the business, not second‑guessing HMRC deadlines.
We’ve got this. If you’d like our rolling VAT tracker template or a quick sense‑check of your figures, get in touch today and we’ll respond with practical next steps.
