Guides · Updated 2026-10-15

Should I register for VAT? A guide for UK trades and small businesses

Most trades and small businesses ask this when turnover starts to climb. The rules on when you must register are clear; whether to register early depends on your customers. Figures here come from GOV.UK and were checked on 15 October 2026. Check your own numbers with the VAT threshold checker. This guide covers when you must register, whether to register early, how to register and what changes afterwards.

When you must register

You must register if either:

• your total taxable turnover for the last 12 months goes over £90,000, or
• you expect your taxable turnover to go over £90,000 in the next 30 days alone.

If you go over on a rolling basis, you must register within 30 days of the end of the month you went over (GOV.UK). It's any rolling 12 months, not your tax year, so check it monthly.

You can ask to cancel your registration if your taxable turnover falls below £88,000.

What counts towards taxable turnover

Taxable turnover is everything you sell that isn't VAT exempt or outside the scope of VAT. It includes zero-rated and reduced-rated sales as well as standard-rated ones, and work under the construction domestic reverse charge (GOV.UK). So a heat pump installer whose work is zero-rated still counts those sales towards the £90,000.

Your registration date: a worked example

GOV.UK's example: on 15 July your taxable turnover for the last 12 months reaches £100,000, the first time it has gone over. You must register by 30 August, and your effective date of registration is 1 September. From that date you charge VAT and can reclaim it on your costs.

If you expect to go over in the next 30 days alone (for example, you sign a £100,000 contract on 1 May), you must register by the end of that 30-day period, and the effective date is the date you realised, here 1 May.

If you go over only temporarily

If a one-off job pushes you over but you expect turnover to drop back, you can apply for a registration "exception". HMRC decides; if it refuses, it registers you (GOV.UK).

If you register late

You must pay VAT on sales made since the date you should have registered, even if you didn't charge your customers for it, and you may get a penalty (GOV.UK). That can wipe out the profit on several jobs, which is why the monthly check matters.

How to register

You can usually register online. As a sole trader you'll need your National Insurance number, an identity document such as a passport or driving licence, your bank details, your Unique Taxpayer Reference if you have one, and details of your turnover with an estimate for the next 12 months. You can save the form and come back to it (GOV.UK).

After you register

• Charge VAT from your effective date, and show it on your invoices. Use the quote and VAT calculator to price jobs.
• Send a VAT Return, usually every 3 months, even if there's nothing to pay. The deadline for filing and paying is usually one calendar month and 7 days after the end of the period (GOV.UK).
• Use Making Tax Digital-compatible software to submit returns. Sending a paper return when you're not exempt can bring a penalty of up to £400 (GOV.UK). Making Tax Digital for VAT is separate from Making Tax Digital for Income Tax, which has its own dates.

When registering early can make sense

You can register voluntarily below £90,000. Whether it helps depends mostly on who your customers are:

• Mostly VAT-registered business customers (main contractors, companies): they reclaim the VAT you charge, so your price doesn't really go up for them, and you can reclaim VAT on your own costs.
• Mostly homeowners: adding 20% makes you more expensive than unregistered competitors, unless you absorb it.

Use the quote and VAT calculator to see what a job costs the customer either way.

The Flat Rate Scheme

With the Flat Rate Scheme you pay HMRC a fixed percentage of your VAT-inclusive turnover, but you can't reclaim VAT on purchases except certain capital assets over £2,000. You may be able to join if your VAT turnover is £150,000 or less, excluding VAT. If you spend very little on goods, you're a "limited cost business" and pay 16.5% (GOV.UK). For trades who buy a lot of materials, the standard scheme is often better; ask an accountant to run the numbers. To test your own figures, including the 16.5% limited cost test, use the VAT Flat Rate Scheme calculator.

Trade-specific VAT rules

• Construction reverse charge: when you supply most construction services to another VAT and CIS-registered business, the customer accounts for the VAT. Not for homeowners (HMRC). See CIS explained for subcontractors.
• Energy-saving materials: installing insulation, solar panels, batteries and heat pumps in homes is zero-rated until 31 March 2027, then 5% (VAT Notice 708/6).
• MOTs: no VAT is charged on the MOT fee itself (GOV.UK).

Software

If you register, you'll file VAT returns through Making Tax Digital-compatible software. FreeAgent is £19 a month for sole traders (excl. VAT) or free with some business bank accounts; Zoho Books has a free plan; Xero and QuickBooks file VAT returns on most plans. QuickBooks' Sole Trader Plus plan doesn't include VAT submission (checked 15 October 2026). See best free invoicing apps.

FAQ

Is the threshold based on profit or turnover?

Taxable turnover: what you sell that isn't exempt, not your profit.

What happens if I register late?

HMRC can charge a penalty and you may owe the VAT you should have charged. Register as soon as you know.

Can I deregister if turnover drops?

You can ask HMRC to cancel if taxable turnover falls below £88,000.

When is my first VAT Return due?

Returns usually cover 3 months, and the deadline is usually one calendar month and 7 days after the period ends. Your VAT online account shows the dates.

Do zero-rated sales count towards the threshold?

Yes. Zero-rated and reduced-rated sales count; only exempt and out-of-scope sales don't.

Is this tax advice?

No. It summarises GOV.UK guidance; your accountant can advise on your situation.