VAT Registration Thresholds and Key Changes for 2025
Understanding When Your Business Needs to Register for VAT
The VAT registration threshold has been frozen at £90,000 until 2026, affecting over 150,000 UK businesses annually. Understanding when to register is crucial to avoid penalties and optimize your tax position.
Current VAT Thresholds (2025/26)
UK businesses must monitor their taxable turnover to determine when VAT registration becomes mandatory:
| Threshold Type | Amount | Time Period |
|---|---|---|
| Registration Threshold | £90,000 | Rolling 12-month period |
| Deregistration Threshold | £88,000 | Next 12-month projection |
| Distance Selling Threshold (EU to UK) |
£90,000 | Calendar year |
When Must You Register for VAT?
Mandatory Registration:
- Your taxable turnover exceeds £90,000 in any rolling 12-month period (not just financial year)
- You expect to exceed £90,000 in the next 30 days alone
- You acquire a VAT-registered business
Voluntary Registration:
Businesses below the threshold may choose to register to:
- Reclaim VAT on business expenses
- Appear more established to clients
- Prepare for future growth
- Simplify EU trading
Key Changes for 2025
Important: The government has confirmed the threshold freeze will continue until at least April 2026, meaning more businesses will be pulled into the VAT system due to inflation.
Recent Updates:
- Making Tax Digital (MTD) Phase 2: Enhanced digital record-keeping requirements for VAT-registered businesses
- Late Submission Penalties: New points-based system for late VAT returns
- EC Sales List Removal: Replaced by simpler EU sales reporting within VAT return
Calculating Your Taxable Turnover
Taxable turnover includes all standard, reduced and zero-rated sales, but excludes:
| Included in Threshold | Excluded from Threshold |
|---|---|
| Standard-rated sales (20%) | VAT-exempt sales (insurance, education) |
| Reduced-rated sales (5%) | Outside scope sales (charitable donations) |
| Zero-rated sales (0%) | Disbursements |
| Sale of business assets | Reverse charge services |
Registration Process and Deadlines
Key Steps:
- Identify your threshold date: The date you exceeded £90,000 or will exceed it
- Submit application: Online via HMRC within 30 days of threshold date
- Receive VAT number: Typically within 14 working days (allow longer for paper applications)
- First VAT return: Due 1 month + 7 days after end of your first accounting period
Penalties for Late Registration:
- 0-9 months late: 5% of VAT due + interest
- 9-18 months late: 10% of VAT due + interest
- Over 18 months late: 15% of VAT due + interest
- Potential criminal prosecution for deliberate avoidance
Need VAT Registration Support?
Our specialists can handle your VAT registration, advise on the best scheme for your business, and ensure full compliance with HMRC requirements.
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