VAT registration thresholds in the UK, France and Germany

The short answer

You must register for UK VAT once your taxable turnover passes £90,000, and two separate tests can take you over it. The backward look asks whether taxable turnover in the previous 12 months — a rolling 12 months, checked at the end of every month — has gone over £90,000. The forward look asks whether you expect to go over £90,000 in the next 30 days on its own.

These are not two versions of the same rule. Each has its own deadline, and each starts your registration on a different date. Apply the wrong one and you either register late, in which case the VAT is backdated and penalised, or you start charging VAT weeks before you had to.

Two tests, two deadlines, two effective dates

Read this before anything else. Nearly every costly registration mistake is someone using the backward look's timing in a forward look situation, or assuming the threshold is measured over a tax year.

Look at what the forward look does to that effective date. It is 1 May — not the day the money arrives, and not the end of the 30 days. Every taxable sale from 1 May onwards carries VAT, including the small ones you had no reason to think about. If you priced those as an unregistered business, the VAT comes out of your own margin.

The backward look is a rolling 12 months, not a tax year

This is the rule people get wrong most often, so it is worth being blunt. The £90,000 test does not run from 6 April to 5 April, and it does not run from the start of your accounting year. It is a window that moves forward one month at a time, and it never resets.

At the end of each month, add up taxable turnover for that month and the eleven before it. Over £90,000 and you have crossed. Next month you do it again, with the newest month in the window and the oldest month gone.

Two consequences catch people out.

• A new tax year changes nothing. On 6 April your rolling total is whatever it was on 5 April. Businesses that had a strong autumn often expect April to wipe the slate; it does not.
• You can cross in a month when sales fell. The total moves by the difference between the month arriving and the month leaving, so a quiet month twelve months ago dropping out can push you over on an unremarkable month.

There is no grace for crossing by a small amount and no requirement to stay over before it counts. One month over the line creates the obligation to notify HMRC — although a genuine one-off spike has a formal way out, covered below.

Worked example: creeping up on £90,000 month by month

Here is a small joinery workshop, trading three years, growing steadily. Its rolling 12-month taxable turnover at 31 August 2025 was £71,400. The third column is the month dropping out of the window as the new one arrives — the part most guides omit, and the reason the total sometimes jumps.

April did nothing. The 2026/27 tax year began part-way through that row and the total went from £84,900 to £87,000 regardless. An owner watching a tax-year figure would have seen about £8,700 in April and felt a long way from £90,000 while actually being £3,000 short of it.

June was the warning. At £89,300, with a busy summer ahead, that is the month to start quoting VAT-inclusive prices — not the month to hope.

July crossed on two counts. July was a good month at £11,600, but the £6,300 dropping out did as much work: the total moved £5,300 on a month only about £3,000 above the recent average.

The dates that follow are where the money is.

August sales do not carry VAT. Sales from 1 September do, whether or not the VAT number has arrived. A September job quoted in early August should be quoted VAT-inclusive — the VAT calculator handles what a previously VAT-free price needs to become.

The forward look: a standalone 30-day test

The forward look is not a forecast of your year. It is a test on one 30-day window considered entirely on its own, and the previous eleven months are irrelevant to it.

If you have reason to expect taxable turnover in the next 30 days by itself to exceed £90,000, notify HMRC by the end of that 30-day period. You are registered from the date you realised — normally the date you signed, accepted or were awarded the work, not the date the invoice goes out.

The classic case: on 1 May you sign a £100,000 contract to be delivered inside the month. Register by 30 May, registered from 1 May. It catches consultants who win one large engagement after a year of small ones, builders taking a substantial project deposit, seasonal businesses whose year arrives in a month, and anyone taking a large one-off order of goods.

The practical defence is to negotiate on VAT-inclusive terms whenever a deal could break £90,000 in a month. If a contract says £100,000 and is silent on VAT, the price is generally treated as VAT-inclusive — meaning £16,666.67 of what you thought was your fee belongs to HMRC. Write "plus VAT" in the quote and that argument never happens.

What counts as taxable turnover — and what does not

Taxable turnover is not your bank balance, not your profit, and not everything on your sales ledger. It is the value of the taxable supplies you make in the UK, and the definition has sharp edges.

The first bold line is the one that catches most people. Zero-rated is not the same as exempt. A zero-rated sale is a taxable sale that happens to be taxed at 0%, and every pound counts towards £90,000. A bakery, a children's clothing shop or a builder doing new-build residential work can be legally obliged to register while charging almost no VAT to anyone. Exempt supplies do not count at all, and a business making only exempt supplies cannot register even if it wants to.

The second trap is the reverse charge. Software, advertising or professional services bought from an overseas supplier add to your taxable turnover for threshold purposes even though they are purchases. A small agency spending heavily on overseas ad platforms can be closer to the line than its sales ledger suggests.

Sales into the EU are a separate matter: they do not count towards the UK £90,000, but they can trigger registration abroad. France applies a *franchise en base* of €85,000 for goods and €37,500 for services, Germany's *Kleinunternehmerregelung* applies below €25,000 of previous-year turnover with a hard €100,000 in-year cap, and a fixed establishment — an office, warehouse or staff — can trigger registration regardless of turnover.

Exception from registration, and deregistering at £88,000

Exception is the escape hatch for a genuine one-off. If taxable turnover went over £90,000 in the last 12 months but you can show HMRC it will not exceed the deregistration threshold of £88,000 in the next 12 months, you can apply to be excepted. The test is deliberately tight: the forecast is measured against £88,000, not £90,000, so a business expecting to hover just under the line does not qualify.

Apply online or on form VAT1, with evidence — the contract that will not recur, the customer that has gone. It is not automatic and not retrospective self-service: if HMRC refuses, you are registered from the date you should have been. Being excepted does not end the duty to keep checking the rolling total every month either.

Separately, businesses whose supplies are wholly or mainly zero-rated can apply for exemption from registration, on the basis that their input tax would normally exceed their output tax. Many choose not to, because registration is exactly what lets them reclaim that input tax.

Deregistration works the other way. Once registered, you may apply to cancel if you expect taxable turnover in the next 12 months to fall below £88,000 — a right, not an obligation, and plenty of businesses stay registered below the line by choice. Cancellation is compulsory within 30 days if you stop trading or stop making taxable supplies, and missing that can attract a penalty. Cancel online, or on form VAT7 for changes of legal status and business sales. You file a final return, and if the VAT on stock and assets you still hold exceeds £1,000 you account for it there. Keep the records six years either way.

How to register, and what to do while you wait for your VAT number

Most businesses register online through HMRC's VAT Registration Service, using their business details, turnover figures, bank details and crossing date. You do not have to finish in one sitting. Paper form VAT1 is required in a few cases, including applying for a registration exception, limited liability partnerships, separately registered divisions, local authorities and insolvency practitioners.

Approval brings a nine-digit VAT number, confirmation of your effective date of registration, your first return deadline and access to your business tax account. HMRC asks you not to chase an application until 40 working days have passed, so expect your number to arrive well after your effective date.

That gap is what nobody prepares for. In it you are legally registered and liable for VAT on your sales, but you cannot issue a valid VAT invoice, because one must show a VAT number you do not have yet. HMRC's approach:

• Do not show VAT on invoices raised in the gap.
• Increase your prices by the VAT you will owe, and tell customers why. Charging £1,000 when £166.67 of it belongs to HMRC is a straight loss.
• Reissue them as proper VAT invoices once your number arrives, covering everything from your effective date, so VAT-registered customers can reclaim.
• Keep a list of every invoice raised in the gap — reissuing is far harder reconstructed later. The invoice generator covers the fields a valid VAT invoice needs.

Tell customers early. A VAT-registered customer is largely indifferent because they reclaim it. A consumer-facing business is absorbing a 20% rise or passing it on, and that conversation goes better before the first invoice than after.

Reclaiming VAT on what you bought before you registered

Registration is not purely a cost. You can reclaim VAT on some pre-registration purchases, which for a business that has recently kitted itself out can be a meaningful sum on the first return.

• Goods: four years. VAT on goods bought in the four years before registration is recoverable if the goods are still on hand at your effective date and are for use in the registered business — stock, tools, equipment, computers, vans. Goods already sold or consumed do not qualify.
• Services: six months. VAT on services received in the six months before registration is recoverable — accountancy, legal advice, design work, software subscriptions — where they relate to the business being registered.

The claim goes on your first VAT return and you need the original VAT invoices, so find them before you file. Longer periods apply to land and buildings under the Capital Goods Scheme, which is worth advice if you have bought property.

Voluntary registration: when going early genuinely pays

You can register below £90,000 whenever you like. It is a real decision, and the answer depends almost entirely on who your customers are.

It usually pays when your customers are VAT-registered businesses, because they reclaim what you charge — your price to them is unchanged in substance and you start recovering VAT on your own costs. It also pays when your sales are mainly zero-rated, since you charge 0% out and reclaim 20% in, putting you in a repayment position on most returns; when you are investing heavily up front in premises, plant or stock; and when a missing VAT number on your invoices tells procurement teams more about your size than you want them to know.

It usually does not pay when you sell to consumers or to exempt businesses, neither of whom can reclaim, so 20% is a straight price rise or a straight margin cut — or when your main cost is your own labour and there is little input tax to recover.

Do the arithmetic rather than the vibe: input VAT you would recover, minus VAT you would absorb on non-reclaiming customers, minus the compliance cost.

What changes on day one, including MTD for VAT

From your effective date, several things become true at once.

• You charge VAT at the right rate and issue valid VAT invoices showing your number, the rate and the VAT amount.
• You file VAT returns, normally quarterly. Monthly is available and often worth it if you are regularly in repayment.
• You keep digital records for six years, linked digitally rather than retyped between systems.
• Making Tax Digital for VAT applies immediately, whatever your turnover. The old £85,000 MTD entry threshold was removed in April 2022. Being VAT-registered is what puts you in scope — nothing else. A consultant registering voluntarily on £40,000 of turnover has the same digital record and digital link duties as a wholesaler turning over £5 million.

In practice MTD means returns are filed from software rather than typed into HMRC's portal, and the chain from invoice to return has to hold together digitally. Our MTD for VAT guide covers digital links and what counts as compliant record keeping.

Choosing a scheme: flat rate, cash accounting and annual accounting

A business crossing £90,000 is comfortably inside the entry limit for all three optional schemes. Flat rate and cash accounting cannot be combined, so choose deliberately.

Flat rate deserves real analysis. The saving is genuine for service businesses with low goods spend, right up until the limited cost rule bites — at which point 16.5% of gross takings with no input recovery is usually worse than standard accounting. Model both on a full year of your actual figures.

What getting it wrong costs, and the routine that prevents it

Late registration is expensive because the liability is backdated. You owe VAT on everything supplied from the date you should have registered — not the date you noticed — and you almost certainly never collected it from those customers, so it comes out of your margin. A failure to notify penalty sits on top, charged as a percentage of the VAT you should have paid: nothing for a non-deliberate failure you disclose yourself within 12 months, a band of roughly 10% to 30% for most other non-deliberate cases, and up to 100% where the failure was deliberate and concealed. Telling HMRC before HMRC tells you is worth a great deal.

Once registered, late submission works on points. Each late return is a point, and a penalty lands at the threshold for your filing frequency.

At the threshold the penalty is £200, plus a further £200 for every subsequent late submission while you remain at it.

Late payment comes in two stages. Nothing for days 1 to 15. From day 16 to 30, a first penalty of 3% of what was outstanding at day 15. From day 31, that 3% plus a further 3% of the balance at day 30, and a second penalty accruing daily at 10% a year until the balance is cleared. Late payment interest runs from day one regardless, and a Time to Pay arrangement proposed at any stage can reduce or remove the penalties.

None of this is hard to avoid. Once a month, on the same day:

1. 1Close the month's sales so the figures are complete, not nearly complete.
2. 2Add up the last 12 months of taxable turnover — including zero-rated sales, and dropping the month that has just fallen out.
3. 3Write the number down where you will see it next month, so £89,300 does not arrive as a surprise.
4. 4Look at the next 30 days separately. Any single contract or order that could exceed £90,000 on its own is a forward-look trigger the moment you accept it.
5. 5Act at £80,000, not £90,000 — quote VAT-inclusive, warn customers, tidy the record keeping. The tax deadline calendar is a sensible place to anchor the monthly check.

Be honest about steps 2 and 3: this is a manual habit. No accounting product, ours included, will tap you on the shoulder when you cross £90,000. The obligation to notice is yours, so attach the check to something you already do every month.

Where Marchant fits

Marchant is a UK accounting platform launching in November 2026. It is built so the figure you need for that monthly check is already in your ledger — taxable sales captured as you invoice, with zero-rated and exempt supplies distinguished, so the 12-month total you add up is the right total rather than a bank-feed approximation. Reading it every month is still your job.

For returns, Marchant is built on HMRC's APIs, and listing on HMRC's recognised-software list is in progress ahead of the November 2026 launch. To check where you stand on Making Tax Digital in the meantime, try the MTD checker, see Marchant for UK businesses, or compare Marchant to Xero. Plans and pricing →