For freelancers and contractors, VAT registration often arrives sooner than expected. One busy quarter can push your turnover over the limit, and registering late can mean paying VAT out of your own pocket on income you have already been paid for. Here is how the VAT threshold works, how to keep track of it, and when it can make sense to register before you have to.
What is the VAT registration threshold?
The VAT registration threshold is currently £90,000 of taxable turnover. Taxable turnover means the total value of everything you sell that is not exempt from VAT, including zero-rated sales. It is your income before expenses, not your profit.
The two tests you need to watch
- The rolling 12-month test. You must register if your taxable turnover for the last 12 months goes over £90,000. This is not based on the tax year: you need to check it at the end of every month.
- The next 30 days test. You must also register if you expect your taxable turnover to go over £90,000 in the next 30 days alone, for example when you win a large contract.
How quickly do you need to register?
| Situation | Register by | VAT applies from |
|---|---|---|
| Turnover for the last 12 months went over £90,000 | Within 30 days of the end of the month you went over | The first day of the second month after you went over |
| You expect to go over £90,000 in the next 30 days | By the end of that 30-day period | The date you realised you would go over |
For example, if your rolling 12-month turnover passes £90,000 on 15 July, you must register by 30 August and charge VAT from 1 September. If you register late, HMRC can ask you to pay the VAT you should have charged since that date, plus a penalty.
How to keep track of your turnover
- Keep a simple monthly total of your invoices, and add up the last 12 months at every month-end.
- Set an early warning at around £80,000 so you have time to plan prices, contracts and software.
- Remember to include all your taxable work, including small side projects, but leave out VAT-exempt income.
- If a spike is genuinely one-off, ask your accountant about applying for an exception from registration.
Should you register for VAT voluntarily?
You can register even if your turnover is below £90,000. Whether it helps depends mostly on who your clients are.
It can make sense if
- most of your clients are VAT-registered businesses that can reclaim the VAT you charge, so your prices stay competitive;
- you buy expensive equipment or software and want to reclaim the VAT on it;
- being VAT-registered makes you look more established to larger clients.
It may not suit you if
- you mainly work for private individuals, who cannot reclaim VAT and would effectively pay 20% more;
- you have few costs with VAT on them, so there is little to reclaim;
- you would rather avoid extra admin: all VAT-registered businesses must keep digital records and file VAT returns through Making Tax Digital software.
Some freelancers use the Flat Rate Scheme to simplify their VAT, but it does not suit everyone, particularly those with low costs, so it is worth running the numbers first. If your turnover later falls below £88,000, you can ask to cancel your registration.
How Chalmers & Partners can help
We help freelancers and small businesses in London decide when to register, complete the registration, choose the right VAT scheme and file VAT returns on time. Find out more about our VAT services, or book a consultation and we will check where you stand.
This article provides general information for the 2026/27 tax year and is not personal tax advice. Rules and rates can change, so please speak to an accountant about your own circumstances.
