If you run a limited company, understanding when and how to register for VAT is a compliance keystone that directly impacts your profit margins and how your brand is perceived by clients.
For the 2026/27 tax year, the VAT registration threshold remains at £90,000. It’s important to remember that this isn't measured by your fixed accounting year; it’s calculated on a rolling 12-month basis. At the end of every month, you should look back at your previous year of trading. If your taxable turnover has topped £90,000, you have a legal obligation to notify HMRC.
This rule also applies to future expectations. If you anticipate a surge—for instance, if you expect your turnover to cross that £90,000 mark in the next 30 days alone—you must register immediately rather than waiting for the 12-month look-back to catch up.
While hitting this milestone is a great sign of growth, keeping a close eye on your trailing turnover ensures you stay compliant. If business slows down, the current deregistration threshold sits at £88,000, giving you a small buffer before you can opt back out. These limits apply to all business structures equally, so there is no separate threshold specifically for limited companies.
Now that you’re clear on the numbers, let's look at how this works in practice and where you might find opportunities to save.
When business owners look into the VAT threshold, they're generally trying to get a handle on two things: what the current limit is and how to actually calculate their turnover against it.
The current threshold is £90,000, increased from £85,000 in April 2024. This threshold is based on taxable turnover, not profit.
This is the total value of everything your business sells that is not either VAT exempt or ‘outside of scope’.
It therefore includes:
Rather than being tied to any one financial year, it applies to any rolling 12-month basis. This means you should check your turnover at the end of each month and look back over the previous 12 months. If that total exceeds £90,000 or is likely to do so over 30 days, registration becomes compulsory.
If you exceed the threshold and fail to register:
This can create cash flow pressure, particularly if you didn't charge VAT to customers at the time.
Yes, absolutely.
Voluntary registration is permitted even if turnover is below the compulsory threshold.
Some businesses register early because it affords them certain benefits like:
Whether this is appropriate depends on your customer base and cost structure.
If your limited company registers for VAT, you may be eligible for the VAT Flat Rate Scheme.
This scheme is designed to simplify VAT accounting for smaller businesses with turnover below the eligibility limit of £150,000.
Under the Flat Rate Scheme:
The scheme may suit businesses that:
For example, consultancy businesses with minimal equipment costs often find the scheme attractive.
However, it is not always beneficial. If you incur high VAT costs on purchases, the standard VAT scheme may be more efficient.
Beyond scheme selection, you can manage VAT efficiently by:
Effective VAT planning supports wider financial control rather than creating compliance stress.
If your turnover is approaching £90,000, you should:
This allows you to plan rather than simply reacting. The key is not just knowing the number. It is understanding how it applies to your business model, growth plans and pricing strategy.
If you would like tailored advice on VAT registration, scheme selection and how to save on VAT within your business, book a consultation with our team today. Don't forget, we also offer a broad range of business tax advice services which you can check out here.
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