VAT registration and deregistration thresholds

The thresholds

Registration threshold: £90,000 of taxable turnover (GOV.UK: register for VAT)
Deregistration threshold: £88,000 of taxable turnover (GOV.UK: cancel your registration)
Time to register: Within 30 days of the end of the month in which turnover went over the threshold, or by the end of the 30-day period for the next 30 days test
Time to cancel when no longer eligible: Within 30 days
Records after cancelling: Kept for 6 years

The past 12 months test

At the end of any month, a business must look back at its taxable supplies in the previous 12 months, or since it started if that is shorter. VAT Notice 700/1 calls this the historic test. If the total is over £90,000, the business must register.

GOV.UK's registration guidance says the business has to register within 30 days of the end of the month in which it went over the threshold. Its effective date of registration is the first day of the second month after it went over.

For example, a sole trader whose rolling 12-month turnover first goes over £90,000 in June 2026 must register by 30 July 2026, and is registered from 1 August 2026.

The next 30 days test

A business must also register at any time it expects its taxable supplies in the next 30 days alone to go over £90,000 (VAT Notice 700/1). This catches a single large contract or a new business that starts at scale.

It must register by the end of that 30-day period. GOV.UK sets the effective date as the date the business realised it would go over the threshold. The date turnover goes over is a later date and does not set the registration date.

What counts towards taxable turnover

Standard-rated and zero-rated sales count (GOV.UK: when you must register).
Goods hired or loaned to customers, business goods used for personal reasons, and goods bartered or given in part-exchange.
Services the business buys from abroad that it would account for under the reverse charge.
Building work over £100,000 that the business has done for it, in some circumstances set out in the guidance.

Exception for a temporary breach

A business that goes over the threshold once can apply for an exception from registration. VAT Notice 700/1 requires it to show HMRC that its taxable supplies will not go over the deregistration threshold of £88,000 in the next 12 months.

The business applies to HMRC, and GOV.UK says HMRC will then either approve the exception or register the business. Keep the forecast and the reason for the one-off turnover on file, because the application rests on them.

Voluntary registration

A business under the threshold may register voluntarily, and may register before it starts making taxable supplies, as an intending trader. VAT Notice 700/1 allows a voluntary registration to be backdated by up to 4 years from the date the business registers.

Once registered voluntarily, the business has the same obligations as any other registered business: returns under Making Tax Digital, VAT on its taxable sales and the penalty rules. See Making Tax Digital for VAT rules.

Exemption from registration

A business whose taxable supplies are all or mostly zero-rated may not need to be registered. VAT Notice 700/1 calls this exemption from registration.

Cancelling a registration

A business must cancel its registration if it stops being eligible, for example when it stops trading, sells the business or joins a VAT group. GOV.UK says it must cancel within 30 days or it may be charged a penalty.

A business whose taxable turnover falls under £88,000 can ask HMRC to cancel. VAT Notice 700/11 frames this as a forecast: taxable turnover in the next 12 months will not exceed the cancellation limit.

The cancellation date is either when the reason took effect, such as the date trading stopped, or the date the business asked to cancel (GOV.UK). Most businesses can cancel online. Form VAT7 is used by post in some cases, such as selling the business or disbanding a VAT group.

A new owner who wants to keep the seller's VAT number uses form VAT68 (VAT Notice 700/11).

Stock and assets on cancellation

On the cancellation date the business must account for VAT on stock and other assets it holds if it reclaimed, or could have reclaimed, VAT when it bought them and the total VAT due on them is over £1,000 (GOV.UK). VAT Notice 700/11 confirms that nothing is due if the total would be £1,000 or less.

The business then sends a final VAT return and keeps its VAT records for 6 years. A final return after cancellation is outside the late submission penalty points system (GOV.UK), though the VAT on it is still due.

Questions

Does a client need to tell HMRC within 30 days of other changes?

Yes. VAT Notice 700/11 warns that a business that does not tell HMRC about changes affecting its registration details within 30 days of them happening may be charged a penalty.

Can a business that has just registered voluntarily cancel straight away?

A business can ask to cancel when its taxable turnover falls under £88,000 (GOV.UK). Its last return is a final return, which is outside the penalty points system (GOV.UK).

In Accountin

In Accountin, the effective date of registration goes into the client's VAT settings, and the deadlines dashboard works out each return date from there.