VAT Threshold Calculator UK

Q: What is the VAT registration threshold?

You must register for VAT once your VAT-taxable turnover exceeds £90,000 over any rolling 12-month period, or if you expect to exceed it in the next 30 days alone. It is measured continuously, not by your accounting year, so you can cross it at any point. Registration is a legal requirement once you are over. The deregistration threshold is £88,000, set just below so businesses hovering around the line are not forced to register and deregister repeatedly.

Q: Does VAT apply to all my turnover or just the amount over £90,000?

All of it. Once registered, you charge VAT on your entire VAT-taxable turnover, not just the portion above £90,000. So crossing the threshold means 20% of everything you sell becomes VAT. For a B2C business that cannot pass this on, net income can drop sharply just after registering, keeping £83,333 of a £100,000 turnover instead of the full amount. Plan for VAT on your whole turnover, not just the excess.

Q: Why might I earn less after crossing the VAT threshold?

If you sell to consumers who cannot reclaim VAT and you cannot raise prices, you must absorb the 20% VAT from your margin. Crossing from £90,000 to £95,000 of turnover then cuts your net from £90,000 to around £79,167, £10,833 less for earning more. This creates a dead zone between £90,000 and roughly £108,000 where extra turnover earns nothing net. It only affects B2C businesses that cannot pass the VAT on.

Q: Does the VAT threshold affect B2B businesses?

Barely. If your customers are VAT-registered businesses, they reclaim the VAT you charge, so adding 20% costs them nothing, and the threshold becomes a paperwork event rather than a financial one. Registering can even be slightly positive for a B2B supplier, because you can reclaim the VAT on your own purchases while your clients reclaim what you charge them. The threshold trap simply does not apply to B2B.

Q: How is the rolling 12-month turnover calculated?

It is your total VAT-taxable turnover over any consecutive 12-month period, checked continuously, not your financial year. At the end of each month, you look back over the previous 12 months; if that total exceeds £90,000, you must register. This is why year-end-only checking is risky: you can cross the threshold mid-year and incur a registration obligation before your accounts are drawn up. Track your rolling total monthly as you approach £90,000.

Q: Can I deregister if my turnover falls?

Yes. If your VAT-taxable turnover falls below the £88,000 deregistration threshold, or you expect it to, you can apply to cancel your VAT registration. The threshold is set just under the £90,000 registration level to avoid businesses flipping in and out. Deregistering means you stop charging VAT, helpful for B2C pricing, but also lose the ability to reclaim input VAT. Whether it is worth it depends on your customer mix and VAT-bearing costs.

Q: Can I split my business to stay under the threshold?

Not artificially. HMRC actively challenges artificial separation or disaggregation, splitting one business into two to keep each under £90,000, and can treat them as a single business, demanding backdated VAT and penalties. Genuinely separate businesses with distinct activities, customers, and finances are fine, but a contrived split purely to avoid VAT is not. If you are considering structuring around the threshold, get advice from an accountant first.

See when you must register for VAT, and the trap that catches small businesses — crossing the £90,000 threshold can leave you earning less than you did below it.

You must register for VAT once your rolling 12-month turnover passes the £90,000 threshold — and the catch most small businesses miss is that VAT then applies to your whole turnover, not just the amount above £90,000. If your customers are consumers who can’t reclaim VAT, you face an unwelcome choice: raise your prices by 20% and risk losing them, or absorb the VAT from your margin. Absorb it, and crossing from £90,000 to £95,000 of turnover can cut your net income from £90,000 to around £79,000 — you’d actually keep £10,800 less for earning more. This creates a “dead zone” between £90,000 and roughly £108,000 where extra turnover earns you nothing. But for businesses selling to other VAT-registered firms, who reclaim the VAT, the threshold is a non-event. This calculator shows where you stand against the threshold and what registering really means for your situation. To compare VAT schemes, use the Flat Rate VAT Calculator; for the wider picture, the Limited Company Profit Calculator.

Common examples:

VAT taxable turnover

Rolling 12-month taxable turnover

Use taxable turnover, not profit. This is a rolling 12-month total, not tax year turnover.

Expected taxable sales in next 30 days

Average monthly taxable sales

Used to estimate when you may cross the threshold.

Exempt / outside-scope sales

Shown separately only — not included in VAT taxable turnover.

Threshold settings

Registration threshold

Deregistration threshold

Current VAT status

Customer type

VAT impact estimate

VAT rate to charge

After registration pricing

VATable costs excluding VAT

Input VAT you may reclaim under standard VAT accounting.

Average VAT on costs

Deadline estimate

Month-end already passed?

If you exceeded the threshold at month end, HMRC normally expects registration within 30 days.

Projection lookahead

months

VAT threshold result

VAT registration status

Calculating…

Distance to threshold

—

Next 30 days test

—

Projected crossing

—

Deregistration check

—

Output VAT estimate

—

Net VAT cost

—

VAT threshold breakdown

Calculating…

Simplified estimate only. VAT taxable turnover, exempt supplies, place of supply, registration timing, penalties and schemes can be complex. Check HMRC rules or speak to an accountant.

✦ Explain with AI →

VAT threshold — quick lookup

The left table shows what registering does to your net income as turnover rises, for a B2C business that absorbs the VAT versus one that passes it on (or sells B2B). The right lists the key VAT thresholds you need to know. The headline is in the left table: for a B2C absorber, crossing the threshold actually cuts net income until turnover reaches around £108,000.

Net kept as turnover rises

Turnover	Absorb VAT	Pass on / B2B
£85,000	£85,000	£85,000
£90,000	£90,000	£90,000
£95,000	£79,167	£95,000
£100,000	£83,333	£100,000
£108,000	£90,000	£108,000

Key VAT thresholds

Threshold	Amount
Registration	£90,000
Deregistration	£88,000
Test period	Rolling 12 months
Standard VAT rate	20%
Flat Rate Scheme limit	£150,000

“Absorb VAT” assumes a B2C business that can’t raise prices, so the VAT comes out of the turnover figure (net = turnover ÷ 1.2). “Pass on / B2B” assumes the customer pays the VAT — either because prices rise 20% or because business customers reclaim it. The dead zone in the absorb column, from £90,000 to £108,000, is the famous threshold trap.

How the VAT threshold works

VAT registration isn’t optional once you cross the threshold — it’s a legal requirement, and the way it’s measured catches people out. Understanding the test and what registering actually does is the difference between planning for it and being ambushed by it.

The rolling 12-month test

You must register for VAT when your VAT-taxable turnover over any rolling 12-month period exceeds £90,000 — not your accounting year, but the most recent 12 months at any point in time. You also have to register if you expect to exceed £90,000 in the next 30 days alone. Once registered, you charge VAT on your sales, can reclaim VAT on your purchases, and submit regular VAT returns. You can deregister if your turnover falls below the £88,000 deregistration threshold.

The threshold testRegister if: rolling 12-month turnover > £90,000 OR you expect > £90,000 in the next 30 days Once registered: charge 20% VAT on sales, reclaim VAT on purchases, file VAT returns

The trap: VAT applies to everything

Here’s the part that surprises people. When you cross £90,000, you don’t just charge VAT on the turnover above the threshold — you charge it on all of your VAT-taxable sales. So the moment you register, 20% of your entire turnover is VAT that belongs to HMRC, not you. Whether that hurts depends entirely on one thing: who your customers are and whether they can reclaim the VAT.

Why your customers decide everything

If your customers are VAT-registered businesses, they reclaim the VAT you charge, so adding 20% costs them nothing — the threshold is a paperwork event, not a financial one. But if your customers are consumers or non-registered businesses, they can’t reclaim it. You either raise your prices by 20% (and risk losing price-sensitive customers) or absorb the VAT from your own margin. Absorb it, and you keep only £100,000 ÷ 1.2 = £83,333 of a £100,000 turnover — the rest goes to HMRC. This is the heart of the threshold trap.

Worked examples

Four scenarios showing how the same turnover affects different businesses depending on who they sell to.

Scenario 1 · B2C business, just over the threshold

Earning more, keeping less

Turnover rises £90,000 → £95,000 · consumers, absorb VAT
Net at £90k: £90,000 · Net at £95k: £79,167
Result: £5,000 more turnover, £10,833 LESS net

A hairdresser or small B2C trader who nudges over £90,000 and can’t raise prices faces the trap head-on. They now owe VAT on the whole £95,000, keeping just £79,167 — over £10,000 less than at £90,000. They’ve earned more and kept less. This is why some small businesses deliberately manage turnover to stay just under the threshold.

Scenario 2 · B2B business, over the threshold

A non-event

Turnover £100,000 · clients are VAT-registered firms
Charge £20,000 VAT · clients reclaim it
Net kept: £100,000 (plus you can now reclaim your own input VAT)

A consultant or agency selling to VAT-registered businesses crosses the threshold with barely a ripple. The clients reclaim the VAT, so the 20% costs them nothing, and the consultant keeps their full £100,000 — and can now reclaim VAT on their own purchases. For B2B, registering can even be slightly positive. The trap simply doesn’t apply.

Scenario 3 · B2C business that raises prices

Passing the VAT to customers

£100,000 of work · raise prices 20% to £120,000 incl VAT
Customer pays the VAT · you keep £100,000
Risk: losing price-sensitive customers

A B2C business can escape the trap by raising prices so customers pay the VAT — billing £120,000 including VAT for what was £100,000 of work, and keeping the full net. The risk is real, though: a 20% price rise can drive away price-sensitive consumers, especially against unregistered competitors who don’t have to charge it. Whether this works depends on how much pricing power you have.

Scenario 4 · Climbing out of the dead zone

When growth finally pays again

B2C absorbing VAT · turnover £108,000
Net kept: £108,000 ÷ 1.2 = £90,000
Only now matches the pre-registration £90,000

For the B2C absorber, growth doesn’t pay again until turnover reaches around £108,000 — the point where the net (£90,000) finally matches what they kept at the threshold. The £18,000 of turnover between £90,000 and £108,000 is the dead zone: real extra work that earns nothing net. Beyond £108,000, growth rewards them again. The lesson: if you’re going to cross the threshold, plan to cross it decisively.

The threshold trap — and how to handle it

Whether the VAT threshold is a disaster or a non-event comes down to four questions about your business. Most guidance just states the £90,000 figure; the real planning is in how it hits you. Work through these before you approach the threshold:

1

Can your customers reclaim the VAT?

This is the question that decides everything. If you sell to VAT-registered businesses, they reclaim it and the threshold barely matters. If you sell to consumers, they can’t, and you face the raise-or-absorb dilemma. Know your customer base before you plan.
B2B → non-event · B2C → the trap
2

Do you have pricing power?

If you can raise prices 20% without losing customers, you pass the VAT on and keep your margin. If you’re competing against unregistered rivals on price, a 20% rise may be impossible, forcing you to absorb it. Pricing power turns the trap into a non-issue.
Can raise prices → pass VAT on
3

How much do you spend on VAT-able costs?

Registration lets you reclaim VAT on your own purchases. A business with significant VAT-bearing costs gets that back, softening or even outweighing the VAT it must charge. The more you buy with VAT on it, the less painful registering is.
High input VAT → reclaim softens it
4

Are you stuck in the dead zone?

If you’re a B2C absorber hovering at £90,000–£108,000, you’re in the zone where growth doesn’t pay. Either stay deliberately under £90,000, or grow decisively past £108,000 — lingering in between is the worst place to be.
£90k–£108k = the dead zone

£95k turnover — same number, three businesses

Identical turnover, very different outcomes:

B2B (clients reclaim VAT)£95,000

B2C, raises prices 20%£95,000

B2C, absorbs the VAT£79,167

Cost of being a B2C absorber−£15,833

The same £95,000 turnover leaves a B2B business with £95,000 and a B2C absorber with £79,167 — a £15,833 gap created entirely by who their customers are. That’s why “should I worry about the VAT threshold?” has no single answer. For most B2B businesses, the honest advice is to register and move on — it barely affects you, and you gain input VAT reclaim. For B2C businesses without pricing power, the threshold is a genuine planning problem: you may choose to manage turnover under £90,000, or commit to growing well past £108,000 where the maths works again. The one place you don’t want to sit is the dead zone in between, doing extra work for no extra net.

Voluntary registration — sometimes worth it

You don’t have to wait for the threshold. Voluntary registration below £90,000 can make sense if you sell mainly to VAT-registered businesses (who don’t care about the added VAT) and you have meaningful VAT-bearing costs to reclaim — you get the input VAT back with no real downside. It can also lend credibility, since being VAT-registered signals a certain scale. Conversely, if you’re a B2C business comfortably below the threshold, staying unregistered keeps your prices competitive against larger registered rivals. The decision, like the trap itself, comes back to who your customers are.

Two scenarios that change the picture

What if…

You’re B2C and creep just over £90,000?

Net at £90,000 (unregistered) £90,000

Net at £95,000 (absorbing VAT) £79,167

Net change for earning more −£10,833

Creeping just over the threshold is the worst outcome for a B2C absorber — £10,833 less net for £5,000 more turnover. If you can’t raise prices, either keep turnover under £90,000 or grow decisively past £108,000. The dead zone in between costs you money.

What if…

You registered voluntarily as a B2B supplier?

VAT charged to clients they reclaim

Input VAT you reclaim back to you

Net effect slightly positive

For a B2B supplier with VAT-bearing costs, voluntary registration below the threshold can be slightly positive — clients reclaim the VAT you charge, and you reclaim the VAT on your purchases. It can also signal credibility. When your customers are businesses, the threshold isn’t a wall to fear.

Key VAT threshold terms explained

The VAT threshold brings together turnover tests, registration rules, and the difference between business and consumer customers. The ten terms below cover what you’ll meet approaching and crossing it.

VAT registration threshold: The turnover level at which you must register for VAT — £90,000 of VAT-taxable turnover over any rolling 12-month period. Crossing it is a legal obligation, not a choice.
Rolling 12-month turnover: The test period for the threshold: your turnover over any consecutive 12 months, checked continuously — not your accounting year. You can cross it mid-year, which catches businesses that only check at year end.
Deregistration threshold: The level below which you can cancel your VAT registration — £88,000. Set just under the registration threshold so businesses hovering around £90,000 aren’t forced to register and deregister repeatedly.
VAT-taxable turnover: The total of everything you sell that isn’t VAT-exempt, including zero-rated sales. It’s this figure, not your total income, that’s measured against the threshold — so the mix of what you sell matters.
Output VAT: The VAT you charge customers once registered — 20% on standard-rated sales. For B2C customers who can’t reclaim it, this is the cost that creates the threshold trap.
Input VAT: The VAT you pay on your business purchases, which you can reclaim once registered. For businesses with high VAT-bearing costs, this reclaim softens the impact of registering, sometimes substantially.
The threshold trap: The effect where a B2C business crossing £90,000 keeps less net than below it, because VAT applies to all turnover. Net only recovers around £108,000, leaving a “dead zone” where extra turnover earns nothing.
Voluntary registration: Registering for VAT below the threshold by choice. Often worthwhile for B2B suppliers with VAT-bearing costs, who reclaim input VAT while clients reclaim the VAT charged — and it can signal credibility.
B2B vs B2C: Whether you sell to businesses (who reclaim VAT) or consumers (who can’t). The single factor that decides whether the threshold is a non-event or a serious problem for your margin.
Flat Rate Scheme: An optional VAT scheme (turnover up to £150,000) where you pay HMRC a fixed percentage of gross turnover instead of tracking input VAT. It can soften the threshold trap for some low-cost businesses.

Five mistakes businesses make with the VAT threshold

The VAT threshold catches businesses out at exactly the moment they’re growing. These five errors, drawn from the recurring r/SmallBusinessUK and r/UKPersonalFinance threads, are the costly ones.

Only checking turnover at year end

The threshold uses a rolling 12-month period, checked continuously — not your accounting year. Businesses that only look at year-end accounts can cross £90,000 mid-year without realising, then face backdated VAT and penalties. Track your rolling 12-month turnover every month as you approach the threshold.

Cost: backdated VAT and penalties Fix: track rolling 12-month turnover monthly

Thinking VAT only applies above the threshold

A widespread misunderstanding: once registered, VAT applies to your entire VAT-taxable turnover, not just the part above £90,000. This is why crossing the threshold can cut a B2C business’s net income so sharply. Plan for VAT on everything, not just the excess.

Cost: a far bigger VAT bill than expected Fix: budget VAT on all turnover once registered

Lingering in the dead zone

A B2C business that absorbs VAT and sits at £90,000–£108,000 earns less net than it did at the threshold — extra work for no extra money. Either deliberately keep turnover under £90,000, or grow decisively past £108,000 where the maths works again. The middle is the worst place to be.

Cost: extra work for zero extra net Fix: stay under £90k or grow past £108k

Forgetting you can reclaim input VAT

Registering isn’t all cost — you can now reclaim the VAT on your business purchases. Businesses focused only on the VAT they must charge overlook the reclaim, which for high-cost operations can substantially offset, or even outweigh, the burden. Count the input VAT reclaim when judging the impact.

Cost: overstating the pain of registering Fix: factor in reclaimable input VAT

Artificially splitting a business to stay under

Some try to dodge the threshold by splitting one business into two to keep each under £90,000. HMRC actively challenges this as “artificial separation” or disaggregation, and can treat the businesses as one and demand backdated VAT. Genuine separate businesses are fine; contrived splits to avoid VAT are not.

Cost: HMRC reaggregation and back tax Fix: don’t split a business just to avoid VAT

Frequently asked questions

What is the VAT registration threshold?

You must register for VAT once your VAT-taxable turnover exceeds £90,000 over any rolling 12-month period — or if you expect to exceed it in the next 30 days alone. It’s measured continuously, not by your accounting year, so you can cross it at any point.

Registration is a legal requirement, not a choice, once you’re over. The deregistration threshold is £88,000, set just below so businesses hovering around the line aren’t forced to register and deregister repeatedly.

Does VAT apply to all my turnover or just the amount over £90,000?

All of it. This is the part that catches people out: once registered, you charge VAT on your entire VAT-taxable turnover, not just the portion above £90,000. So crossing the threshold means 20% of everything you sell becomes VAT.

For a B2C business that can’t pass this on, it means net income can drop sharply just after registering — keeping £83,333 of a £100,000 turnover instead of the full amount. Plan for VAT on your whole turnover, not just the excess.

Why might I earn less after crossing the VAT threshold?

If you sell to consumers who can’t reclaim VAT and you can’t raise your prices, you must absorb the 20% VAT from your margin. Crossing from £90,000 to £95,000 of turnover then cuts your net from £90,000 to around £79,167 — £10,833 less for earning more.

This creates a “dead zone” between £90,000 and roughly £108,000 where extra turnover earns you nothing net. Your net only recovers to the pre-registration £90,000 once turnover reaches about £108,000. It’s the threshold trap, and it only affects B2C businesses that can’t pass the VAT on.

Does the VAT threshold affect B2B businesses?

Barely. If your customers are VAT-registered businesses, they reclaim the VAT you charge, so adding 20% costs them nothing. The threshold becomes a paperwork event rather than a financial one.

In fact, registering can be slightly positive for a B2B supplier, because you can now reclaim the VAT on your own purchases while your clients reclaim what you charge them. For B2B businesses, the threshold trap simply doesn’t apply — the panic around £90,000 is really a B2C concern.

How is the rolling 12-month turnover calculated?

It’s your total VAT-taxable turnover over any consecutive 12-month period, checked continuously — not your financial year. At the end of each month, you look back over the previous 12 months; if that total exceeds £90,000, you must register.

This is why year-end-only checking is risky: you can cross the threshold mid-year and incur a registration obligation before your accounts are drawn up. Track your rolling total monthly as you approach £90,000 to avoid backdated VAT and penalties.

Should I register for VAT voluntarily?

It can make sense below the threshold if you sell mainly to VAT-registered businesses (who don’t mind the added VAT) and you have meaningful VAT-bearing costs to reclaim — you get the input VAT back with little downside, and it can signal credibility.

For a B2C business comfortably under £90,000, staying unregistered usually keeps your prices competitive against larger registered rivals. As with the threshold trap itself, the decision comes down to who your customers are and whether they can reclaim VAT.

Can I deregister if my turnover falls?

Yes. If your VAT-taxable turnover falls below the £88,000 deregistration threshold, or you expect it to, you can apply to cancel your VAT registration. The threshold is set just under the £90,000 registration level to avoid businesses flipping in and out.

Deregistering means you stop charging VAT (helpful for B2C pricing) but also lose the ability to reclaim input VAT. Whether it’s worth it depends, again, on your customer mix and your VAT-bearing costs.

Can I split my business to stay under the threshold?

Not artificially. HMRC actively challenges “artificial separation” or disaggregation — splitting one business into two to keep each under £90,000 — and can treat them as a single business, demanding backdated VAT and penalties.

Genuinely separate businesses with distinct activities, customers, and finances are fine, but a contrived split purely to avoid VAT is not. If you’re considering structuring around the threshold, get advice from an accountant first. See official guidance at gov.uk.

The VAT threshold connects to the VAT schemes, your wider profit, and the income behind your turnover. These calculators handle each piece.

Methodology & sources

How the maths works

The calculator compares your turnover against the £90,000 VAT registration threshold and shows the effect of registering. For a business that absorbs the VAT (typically B2C without pricing power), it treats the turnover as VAT-inclusive once registered, so the net retained is the turnover divided by 1.2 — the rest is VAT due to HMRC. For a business that passes the VAT on, by raising prices or selling to VAT-registered customers who reclaim it, the net is unchanged. The “dead zone” is the turnover range, from £90,000 to about £108,000, where an absorbing business nets less than it did at the threshold, because £108,000 ÷ 1.2 equals the £90,000 it kept before registering.

These are illustrative comparisons to show how the threshold behaves. Real outcomes depend on your customer mix, pricing power, the VAT on your own purchases (which you can reclaim once registered), whether you use the Flat Rate Scheme, and the current thresholds, all of which can change. The aim is to reveal who the threshold trap affects and how to plan around it, not to replace tailored accountancy advice.

Assumptions and conventions used

Registration threshold: £90,000 rolling 12-month turnover
Deregistration threshold: £88,000
Standard VAT rate: 20%
Absorb case: net retained = turnover ÷ 1.2 (B2C, no price rise)
Pass-on / B2B case: net unchanged (customer pays or reclaims VAT)
Dead zone: £90,000 to ~£108,000 for an absorbing B2C business
Input VAT reclaim not modelled in the headline figures
Thresholds shown are illustrative current UK figures

Primary sources

This is not tax or financial advice. This calculator shows where your turnover stands against the UK VAT registration threshold and the effect of registering, using standard formulas and general conventions. The thresholds, rates, and figures shown are illustrative to demonstrate how the threshold behaves, not personal advice or a recommendation. Your actual position depends on your customer mix, pricing power, the VAT on your purchases, whether you use a VAT scheme, what counts as VAT-taxable turnover for you, and the current thresholds, all of which can change. VAT registration is a legal obligation once you exceed the threshold, and failing to register on time can lead to backdated VAT and penalties. Artificially splitting a business to stay under the threshold can be challenged by HMRC. The threshold’s impact varies enormously between B2B and B2C businesses. Before registering, deregistering, or planning around the threshold, consult a qualified accountant and see official guidance at gov.uk.