When to register, how the rolling 12-month test works, whether voluntary registration makes sense, and a free threshold calculator using 2026/27 HMRC rates.
The UK VAT registration threshold for 2026/27 is £90,000. You must register for VAT if your taxable turnover (not profit) exceeds this amount under either of two tests:
At the end of every calendar month, look back at the previous 12 months. If your taxable turnover for that period exceeds £90,000, you must notify HMRC within 30 days. Your registration takes effect from the first day of the second month after you crossed the threshold.
At 31 August 2026, your rolling 12-month turnover reaches £92,000. You must notify HMRC by 30 September 2026. Your VAT registration date is 1 October 2026. All sales from 1 October must include VAT.
If at any point you expect your taxable turnover to exceed £90,000 in the next 30 days alone — for example, you sign a large contract — you must notify HMRC immediately. Registration takes effect from the start of that 30-day period.
This test catches SaaS companies that land an enterprise contract or agencies that onboard a high-value client.
| Threshold | Amount | What It Means |
|---|---|---|
| Registration threshold | £90,000 | Must register when taxable turnover exceeds this in any rolling 12-month period |
| Deregistration threshold | £88,000 | Can deregister if turnover drops below this and is expected to stay below |
| Standard VAT rate | 20% | Applied to most goods and services |
| Reduced rate | 5% | Certain goods (e.g. home energy, children’s car seats) |
| Zero rate | 0% | Books, children’s clothing, most food — still counts toward threshold |
| Flat Rate Scheme limit | £150,000 | Maximum taxable turnover to join the Flat Rate Scheme |
You can register for VAT at any time, even if your turnover is well below £90,000. For some startups, early registration makes financial sense.
We model the financial impact of voluntary registration for every startup client — comparing the VAT you’d reclaim against the admin cost and pricing impact. The right answer depends on your customer mix and cost structure.
If you register late, HMRC will backdate your registration to when you should have registered. You’ll owe VAT on all sales from that date — even if you never charged VAT to your customers. Penalties and interest may also apply. This is one of the most expensive mistakes startups make.
You charge VAT on sales, reclaim VAT on purchases, and pay the difference to HMRC quarterly. This is the default and works well for most businesses.
Available to businesses with taxable turnover under £150,000. Instead of tracking VAT on every purchase, you pay a fixed percentage of gross turnover to HMRC. The percentage varies by industry (e.g. 14.5% for IT consultants, 16.5% for management consultants).
Limited cost traders (businesses spending less than 2% of turnover or £1,000/year on goods) pay a higher flat rate of 16.5% regardless of sector. Most SaaS businesses and consultancies fall into this category, making the Flat Rate Scheme less attractive.
Available to businesses with taxable turnover under £1.35 million. You account for VAT based on when you receive or make payments, rather than when invoices are issued. Helpful for businesses with slow-paying clients.
If your SaaS company sells to customers outside the UK, VAT gets more complex.
Generally outside the scope of UK VAT. The EU customer accounts for VAT under the reverse charge mechanism. You need valid evidence of the customer’s business status and VAT number.
Digital services sold to EU consumers are taxable in the customer’s country. You may need to register for the EU One Stop Shop (OSS) and charge VAT at the customer’s local rate. This applies to SaaS subscriptions, downloadable software, streaming services and similar digital products.
Generally outside the scope of UK VAT, but check the VAT rules in the customer’s jurisdiction. Some countries (e.g. Australia, Canada, India) have their own digital services tax requirements.
AccTek helps SaaS companies navigate international VAT obligations as part of our SaaS accounting service.
One of the most overlooked benefits of VAT registration. You can reclaim VAT on purchases made before you registered, within limits:
This covers equipment, laptops, software licences, legal fees, accountancy fees and other startup costs. You need valid VAT invoices to make the claim.
Enter your monthly figures to see how close you are to the £90,000 threshold and whether voluntary registration could benefit your startup.
This calculator provides estimates based on 2026/27 HMRC thresholds. It assumes consistent monthly figures and standard VAT rates. Your circumstances may vary — speak to AccTek for personalised advice.
All VAT-registered businesses must keep digital records and submit VAT returns using MTD-compatible software. This has been mandatory since April 2022 for all VAT-registered businesses regardless of turnover.
Xero is fully MTD-compliant. AccTek configures Xero for every VAT-registered client with automated bank feeds, digital record keeping and direct VAT return submission to HMRC — so you never need to touch the Government Gateway for VAT again.
| Mandatory Registration | Voluntary Registration | |
|---|---|---|
| When | Turnover exceeds £90,000 | Any time — your choice |
| VAT charging | Must charge on all taxable sales | Must charge on all taxable sales |
| Reclaim input VAT | Yes | Yes — including pre-registration costs |
| Admin burden | Quarterly returns, MTD compliance | Same — quarterly returns, MTD |
| Pricing impact | Prices increase by 20% for non-VAT customers | Same — but B2B customers reclaim it |
| Can deregister | If turnover drops below £88,000 | At any time |
The VAT registration threshold is £90,000. You must register when your taxable turnover exceeds this in any rolling 12-month period, or if you expect it to exceed £90,000 in the next 30 days alone.
At the end of every month, check your taxable turnover for the previous 12 months. If it exceeds £90,000, notify HMRC within 30 days. Registration takes effect from the first day of the second month after you crossed the threshold. This is not based on your financial year — it slides forward every month.
Yes. Voluntary registration lets you reclaim VAT on business purchases — useful for startups buying equipment, software or services with significant VAT. However, you must then charge VAT on your sales and submit quarterly returns.
If you expect taxable turnover to exceed £90,000 in the next 30 days alone — for example, a large contract — you must notify HMRC immediately. Registration takes effect from the start of that 30-day period.
HMRC backdates your registration to when you should have registered. You owe VAT on all sales from that date — even if you never charged it. Penalties and interest may also apply.
Yes. VAT on goods up to 4 years before registration and services up to 6 months before, provided they were for business use and you hold valid VAT invoices.
A simplified scheme for businesses under £150,000 turnover. Pay a fixed percentage of gross turnover instead of tracking every purchase. A 1% discount applies in the first year. Limited cost traders pay 16.5% regardless of sector.
SaaS companies selling digital services to EU consumers (B2C) may need to register for the EU One Stop Shop (OSS) and charge local VAT rates. B2B sales to EU businesses are generally outside UK VAT scope under the reverse charge.
MTD requires all VAT-registered businesses to keep digital records and submit returns using compatible software. Xero is fully MTD-compliant. AccTek configures this as part of every VAT-registered client’s setup.
Yes. If your taxable turnover falls below the deregistration threshold of £88,000 and you expect it to stay below, you can apply to deregister.
Yes. AccTek handles VAT registration, quarterly return preparation and submission via Xero, MTD compliance, Flat Rate Scheme assessment, and international VAT guidance for SaaS and digital services businesses.
No. VAT is based on taxable turnover — the total value of your taxable sales, not your profit. You can cross the £90,000 threshold while making a loss.
AccTek handles registration, quarterly returns, MTD compliance and international VAT — so you don’t have to.
This page is for general information only and does not constitute tax advice. VAT thresholds and rules are subject to change. Individual circumstances may vary — contact AccTek for personalised advice. Content by Godwin Pinto, ACA (ICAEW).
