Should I register for VAT?

Compares staying unregistered, registering and raising your prices, and registering and absorbing the VAT — using the mix of business and consumer customers you actually have.

On the figures so far

Stay unregistered.

certain confidence£11,667 at stake

Every figure came from you, and the gap is £11,667 — well outside rounding.

Refine it in 3 questions below.

The decision

Stay unregistered.

£11,667 better than register and keep your prices the same, on the same figures.

£90,000Registration threshold
£85,000Your turnover
£3,000Input VAT reclaimable
VoluntaryRegistration

Why

You are £5,000 below the £90,000 threshold, so registering is a choice.
50% of your sales go to VAT-registered businesses. They reclaim whatever you charge, so for that share registering costs nothing and lets you reclaim your own input VAT.
You would reclaim roughly £3,000 of input VAT a year on £15,000 of vatable costs, which offsets part of the charge either way.
Registering voluntarily below the threshold also makes a small business look larger, which matters in some markets and not at all in others.

Every option, compared

Ranked by profit after vat — higher is better.

Profit after VAT for each option, with the workings.
Option	Stay unregisteredBest	Register and add VAT to your prices	Register and keep your prices the same
Sales	£85,000	—	—
Costs (VAT is part of the price you pay)	-£15,000	—	—
VAT to pay	£0	—	—
Profit	£70,000	£68,250	£58,333
Sales (excluding VAT)	—	£85,000	—
Costs, now net of reclaimable VAT	—	-£12,500	—
Input VAT you reclaim	—	£2,500	—
Estimated cost of a 20% rise to consumers	—	-£4,250	—
Sales, now VAT-inclusive	—	—	£85,000
VAT inside that price	—	—	-£14,167
Costs, net of reclaimable VAT	—	—	-£12,500
Profit after VAT	£70,000	£68,250	£58,333

Stay unregistered: No VAT returns, no records to keep for it, and your prices stay where they are.
Register and add VAT to your prices: Your 50% of business customers reclaim the VAT and see no change. The rest see a 20% increase.
Register and keep your prices the same: Your customers see no change at all — you take the whole hit out of your margin.

Stay unregistered

Best

£70,000Profit after VAT

Sales: £85,000
Costs (VAT is part of the price you pay): -£15,000
VAT to pay: £0
Profit: £70,000

No VAT returns, no records to keep for it, and your prices stay where they are.

Register and add VAT to your prices

£68,250Profit after VAT

Sales (excluding VAT): £85,000
Costs, now net of reclaimable VAT: -£12,500
Input VAT you reclaim: £2,500
Estimated cost of a 20% rise to consumers: -£4,250
Profit: £68,250

Your 50% of business customers reclaim the VAT and see no change. The rest see a 20% increase.

Register and keep your prices the same

£58,333Profit after VAT

Sales, now VAT-inclusive: £85,000
VAT inside that price: -£14,167
Costs, net of reclaimable VAT: -£12,500
Profit: £58,333

Your customers see no change at all — you take the whole hit out of your margin.

Does this apply to you?

Each of these has to be true. Where your answers settle it we have said so; where they cannot, the test is yours to check.

Your VAT-taxable turnover in any rolling 12 months is below the registration threshold. — met, on your answers
VATA 1994 Sch. 1 para. 1
You make taxable supplies, not exempt ones. — we cannot tell from your answers
VATA 1994 Sch. 9
Your customers can recover VAT, or your supplies are zero-rated. — not met, on your answers
Selling to consumers, registering means either a 20% price rise or a 17% cut in your margin. This is the question that actually decides it.
Not a rule — the commercial test
You can keep digital records and file quarterly. — we cannot tell from your answers
VAT Notice 700/22 — Making Tax Digital

What this does not model

The cost of a price rise to consumers is modelled as losing half the increase. Your market may be more or less sensitive than that — it is the least certain number here.
Assumes all sales and costs are standard-rated. Zero-rated, exempt and reduced-rate supplies change the answer materially.
The threshold is measured on a rolling 12 months, not your accounting year.
Registering brings Making Tax Digital obligations and quarterly returns.

This is information, not tax or financial advice. It shows how the rules apply to the figures you entered — it does not know the rest of your circumstances. Worth checking with an accountant before you act.

Rates as at 6 April 2026 — the 2026/27 tax year.

What to keep

The figures above are only as good as what sits behind them. These are the records HMRC would ask for.

A rolling 12-month turnover figure, updated monthly — the threshold is not tested on your accounting year.
A split of your customers between VAT-registered businesses and consumers.
Your purchase invoices, for the input tax you would recover.
Invoices for goods and services bought before registration — four years for goods still held, six months for services.

The dates that matter

When	What	If you miss it
Within 30 days of the end of the month you exceeded the threshold	Register for VAT.	A failure-to-notify penalty based on the VAT due, and you owe the VAT on sales since the date registration should have taken effect — whether or not you charged it.
Within 30 days of expecting to exceed it in the next 30 days alone	Register on the forward-look test.	The same penalties. One large contract can trigger this without your annual turnover being anywhere near the threshold.
One month and seven days after each quarter end	File the return and pay.	A penalty point; four points in a rolling year brings a £200 penalty and one for every subsequent late return.
4 years for goods, 6 months for services	Reclaim pre-registration input tax.	Out of time. Goods must still be on hand at registration.

How to actually do it

Track turnover on a rolling 12-month basis
At the end of every month, add the previous 12 months of VAT-taxable turnover. The test is not your financial year, and this is the most common way businesses register late.
www.gov.uk/vat-registration/when-to-register
Work out who pays the VAT in practice
Business customers recover it, so registering is neutral to them and you gain your input tax back. Consumers cannot, so it is a price rise or a margin cut.
Register online
Through your Government Gateway account. You will get a VAT number and an effective date; you must charge VAT from that date even if the number arrives later.
www.gov.uk/register-for-vat
Reclaim what you can from before registration
Goods still on hand bought in the last four years, and services in the last six months. Put them on your first return.
www.gov.uk/reclaim-vat
Set up MTD-compatible records
Digital records and a digital link through to the return. Spreadsheets are allowed with bridging software; retyping figures is not.
www.gov.uk/guidance/making-tax-digital-for-vat

Worked examples

Three situations, worked through. They use the same rules as the tool above, so you can check the arithmetic against a case near your own.

£70,000 turnover, all business customers, £14,000 of vatable costs

Output VAT charged: £14,000 — recovered by your customers
Input VAT recovered: £2,800
Effect on your customers: None
Net gain: £2,800 a year

Voluntary registration is close to free money here: the VAT you charge costs your customers nothing and the VAT you pay comes back.

£70,000 turnover, all consumers, £14,000 of vatable costs

Price rise to keep margin: 20%
Or margin lost by absorbing it: £11,667
Input VAT recovered: £2,800
Net position: Worse by about £8,900

The mirror image. Below the threshold and selling to consumers, staying unregistered is a real competitive advantage.

£88,000 turnover and growing, mixed customers

Months to the threshold: Three or four
Registration: Compulsory once crossed
Price change: Easier before growth than after

Approaching the threshold the decision is about timing, not whether. Registering early avoids a price rise landing on newly won customers.

The rules behind this

Every figure above comes from one of these. Where we have interpreted rather than calculated, the tool says so.

Registration is compulsory when VAT-taxable turnover exceeds £90,000 in any rolling 12 months, or is expected to in the next 30 days alone.
VATA 1994 Sch. 1 para. 1
Voluntary registration below the threshold is allowed for anyone making taxable supplies.
VATA 1994 Sch. 1 para. 9
Input tax is recoverable on goods bought in the four years before registration and still on hand, and services in the six months before.
VAT Regulations 1995, reg. 111
Deregistration is possible once turnover falls below the deregistration threshold.
VATA 1994 Sch. 1 para. 13
All VAT-registered businesses must keep digital records and file under Making Tax Digital.
VAT Regulations 1995, reg. 32A

Questions people ask

Is it ever worth registering voluntarily?

Yes, when your customers are VAT-registered businesses or your supplies are zero-rated. In both cases the VAT you charge costs nobody anything and the VAT you pay on costs comes back. It is one of the few genuinely free wins in the system.

What counts towards the threshold?

VAT-taxable turnover: everything you sell that is standard, reduced or zero-rated. Exempt supplies and things outside the scope do not count, and neither does the sale of capital assets.

Can I deliberately stay under the threshold?

You can choose not to grow, and many businesses do — but you cannot artificially split one business into two to stay under. HMRC can issue a direction treating separated businesses as a single person, with effect from the date of the direction.

What happens if I register late?

You owe VAT on sales from the date you should have been registered, whether or not you charged it, plus a failure-to-notify penalty. Going back to customers months later for 20% they were never invoiced is the part that hurts.

Can I deregister if turnover falls?

Yes, once it drops below the deregistration threshold. You have to account for VAT on assets still on hand above a de minimis value, so the exit is not always free.

Software that files it for you

Partner links

If you keep your own books, these are the packages that handle Self Assessment and Making Tax Digital.

FreeAgent

4.8

Free optionMTD ready

The freelancer and contractor favourite, free with some bank accounts.

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Built-in Self Assessment and MTD for Income Tax filing

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See FreeAgent

QuickBooks

4.6

MTD ready

The big all-rounder with the deepest MTD track record.

Sole Trader plan built specifically for Self Assessment and MTD
Snap and store receipts, automatic bank feeds

From about £10/mo, frequent 90% off intro offers

See QuickBooks

Xero

4.5

MTD ready

The scale-up choice once you have staff, stock or VAT.

Huge app marketplace and the accountant industry standard
Strong for VAT, payroll and multi-user limited companies

From about £15/mo

See Xero

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