VAT threshold and rates 2026/27
A business must register for VAT once its taxable turnover goes over the registration threshold. The table below shows that threshold, the lower figure at which a registered business can ask HMRC to cancel its registration, and the three rates of VAT.
| Threshold | Taxable turnover |
|---|---|
| Registration threshold | £90,000 |
| Deregistration threshold | £88,000 |
Source: www.gov.uk/register-for-vat, checked 23 September 2026; www.gov.uk/how-vat-works/vat-thresholds, checked 23 September 2026
| Rate | VAT |
|---|---|
| Standard rate | 20% |
| Reduced rate | 5% |
| Zero rate | 0% |
Source: www.gov.uk/vat-rates, checked 23 September 2026
When registration becomes compulsory
There are two tests, and meeting either one is enough. The first looks back: taxable turnover over the last twelve months has gone above the threshold. The second looks forward: turnover is expected to go above it within the next thirty days. Because the twelve months are a rolling period, the total can cross the line in any month of the year.
Under the first test, the business has thirty days from the end of the month in which it went over to register, and registration takes effect on the first day of the second month after. Under the second, it must register by the end of the thirty days, and registration takes effect from the date it realised. A business that registers late owes VAT on its sales from the date it should have registered, and may also face a penalty.
What counts as taxable turnover
Taxable turnover is the value of everything the business sells that is neither exempt from VAT nor outside its scope. Zero-rated and reduced-rated sales both count, so a business can pass the threshold while charging little or no VAT. If most of what it sells is zero-rated, it can ask HMRC for an exemption from registration. Exempt sales, such as postage stamps and financial and property transactions, do not count, and a business that sells only exempt goods or services does not have to register.
The three rates and cancelling registration
The standard rate in the table above applies to most goods and services. The reduced rate covers a shorter list that includes children's car seats and home energy, and the zero rate covers items such as most food and children's clothes. The VAT calculator adds VAT to a price or takes it out of one, at any of the three rates.
A registered business can ask HMRC to cancel its registration once taxable turnover falls below the deregistration threshold. It must cancel within thirty days if it stops being eligible, for example because it stops trading. The rates and thresholds page lists the other tax figures for 2026/27.
Questions
Can a business register before it reaches the threshold?
Yes. A business under the threshold can register voluntarily. From the date HMRC registers it, the business has to pay HMRC any VAT it owes.
What if turnover goes over the threshold for a short time only?
The business can apply to HMRC for a registration exception if the rise is temporary. HMRC writes to say whether it agrees, and registers the business if it does not.
Is zero-rated the same as exempt?
No. Zero-rated sales carry VAT at the zero rate and count towards taxable turnover. Exempt sales fall outside VAT and do not count towards the threshold.
This is information, not financial advice.