What is a VAT threshold and what will happen when I cross it?

VAT threshold blog header

The threshold is the amount of money (taxable turnover) you can earn before you have to register for VAT.

Your taxable turnover is calculated as being the total value of everything you sell or supply, excluding exempt supplies. This is calculated on a 12 month rolling basis and is not based on your financial year or the tax year. It is therefore important to regularly check your taxable turnover for the last 12 months. 

What is the current VAT threshold?

The VAT threshold for registration is currently £85,000. This threshold has been the same since 2017 and has been frozen until March 2024. After this the threshold may change so you need to keep an eye on this. Once your taxable turnover exceeds this amount, you must register for VAT. It is important to note that this applies to all businesses including sole traders.

There is also a threshold if you are already registered for VAT but are using the  cash scheme. If your taxable turnover in a 12 month period exceeds £1.35 million then you are no longer eligible to use the cash scheme and you will need to change over to the accrual accounting scheme.

You can find out more about the different schemes in our blog: Which VAT Scheme do I use?

Do I have to cross the VAT threshold before registering?

You can register for VAT anytime even if you don’t meet the threshold if you believe it will be advantageous for your business. The threshold is just when you MUST register. For more information, check out our blog Should I register for VAT Voluntarily?


What happens when I cross the threshold?


When your VAT taxable turnover exceeds £85,000 in the last 12 months or

you expect your VAT taxable turnover to be more than £85,000 in the next 30 day period then you must register for VAT. 


Once you discover your business’s turnover in a 12 month period is going to pass the VAT threshold, you must register for VAT with HMRC within the next 30 days. 

If your business turnover has exceeded the VAT threshold in the past 12 months, you’ll need to notify HMRC within 30 days of the end of the month that you went over the threshold.


Most businesses can register for VAT online through the gov.uk website. Once you are registered, you will receive a VAT registration certificate which shows your VAT registration number, registration date and details of first payment.


From your VAT registration date you are responsible for charging VAT on items you sell or services you provide to your customers. You will be able to reclaim VAT which you pay on items that you purchase for your business. You will also need to submit VAT returns to HMRC and will need to maintain accurate VAT records.


How can PPF help?

As part of our standard accounting service we’ll keep an eye on your turnover to make sure you register in plenty of time, so that’s the first part covered.  We’ll also set up your Xero to ensure you’re charging VAT correctly, and you’re all set up to claim VAT back where possible.

Our VAT Return service is also here to help you keep the tax man happy and have peace of mind while running your business.

Interesting in working with us? Head to our Get Started page and lets book in a call.