Understanding the VAT threshold 2025 is crucial for every UK business owner. If you are self-employed, run a small business, or are growing a firm, understanding when you need to register for VAT with HMRC will help you remain on the right side of the law, avoid fines, and manage your financial resources well.
This article gives clear examples and helpful tips on what the VAT threshold is, how to figure it out, when to register, and what it implies for your business growth in 2025.
What Is the VAT Threshold for 2025?
The UK VAT registration threshold for 2025 remains £90,000 in taxable turnover over any rolling 12-month period. This means that if your business earns £90,000 or more from products or services that are liable for VAT, you have to register for VAT with HM Revenue and Customs (HMRC).
Since April 2024, the income limit has been set at £90,000 and is expected to stay the same for the 2025/26 tax year. The government reviews this figure every year to balance business growth and tax fairness.
How Is the VAT Threshold Calculated?
The VAT threshold is worked out based on your VAT-taxable turnover, which means the total value of all goods and services your business sells in the UK that are not exempt from VAT.
In simple words, it’s the total income from your sales that are charged VAT, whether at the standard, reduced, or zero rate.
Your taxable turnover includes:
- Standard-rated goods and services (20%) — such as clothing, electronics, and restaurant meals.
- Reduced-rate items (5%) — like children’s car seats and home energy.
- Zero-rated goods (0%) — including most food, books, and children’s clothes.
It does not include:
- VAT-exempt sales like insurance, education, or healthcare.
- Overseas sales, or goods and services sold outside the UK.
- Transactions outside the scope of VAT, such as certain reimbursements or disbursements.
Rolling 12-Month Rule
The VAT registration threshold is checked on a rolling 12-month basis, not by financial or calendar year. That means you should review your sales every month to see if your total taxable turnover over the past 12 months has exceeded £90,000.
If it has, you must register for VAT within 30 days, even if your turnover later drops. Regularly tracking your turnover helps you stay compliant with HMRC, avoid penalties, and plan your business growth effectively.
When Do You Need to Register for VAT?
You must register for VAT with HMRC when your taxable turnover, the total value of your VAT-applicable sales, reaches or is expected to reach the £90,000 threshold.
This can happen in two ways:
- If your turnover for the past 12 months has exceeded £90,000.
- If you expect your turnover to go over £90,000 in the next 30 days.
Example 1 — Past 12 Months
- If on 10 July 2025 your rolling turnover reaches £92,000, you must register by 10 August 2025.
- Your official VAT registration date will be 1 September 2025.
Example 2 — Expected in the Next 30 Days
- If on 1 May 2025 you sign a £100,000 contract that will be paid within a month, you must register by 31 May 2025.
- In this case, your registration starts from 1 May 2025 — the date you realized you’d cross the limit.
If you’re ready to start the process, you can follow our detailed step-by-step guide here:
👉 How to Register Your Business for VAT in the UK
Staying aware of these deadlines helps you remain compliant, avoid fines, and manage VAT efficiently from the start.
What Happens After You Cross the Threshold?
Once you exceed the VAT threshold, you have 30 days to notify HMRC and complete registration.
You will then:
- Receive a VAT registration number
- Start charging VAT on taxable sales
- Submit quarterly VAT returns through MTD software
- Keep detailed digital records for at least 6 years
Failure to register in time can lead to backdated VAT payments, penalties, and interest charges.
👉 Learn more about consequences in our guide: VAT Penalties in the UK
Why the VAT Threshold Matters
The VAT threshold is an important milestone for growing UK businesses. Reaching it means your business is doing well — but it also brings new responsibilities.
Once you cross the £90,000 limit, you’ll need to:
- Charge VAT on your sales correctly.
- Keep digital accounting records for all transactions.
- File VAT returns on time using approved software.
- Follow HMRC rules to stay compliant during audits or reviews.
By keeping an eye on your turnover each month, you can plan, register on time, and avoid any fines or unexpected tax issues.
Final Thoughts
The VAT threshold for 2025 remains £90,000, and it continues to be a critical benchmark for UK businesses. Tracking your turnover closely and understanding your VAT obligations ensures financial stability and legal compliance.