VAT registration is based on taxable turnover, not profit. You therefore need to monitor the value and type of sales the business makes rather than waiting until the annual accounts are prepared.
When must a business register?
A business must normally register for VAT if:
- Its taxable turnover for the previous 12 months goes over £90,000
- It expects its taxable turnover to go over £90,000 within the next 30 days
The first test uses a rolling 12-month period, not just the accounting year. This means turnover should be monitored regularly as the business grows.
Businesses below the threshold can choose to register voluntarily, but the effect on pricing, customers, record keeping and cash flow should be considered first.
Are your sales VATable?
Most ordinary sales of goods and services are VATable, but some are exempt or outside the scope of UK VAT.
Taxable turnover includes sales that are:
- Standard-rated
- Reduced-rated
- Zero-rated
Zero-rated sales still count towards the VAT registration threshold even though VAT is charged at 0%.
Exempt sales do not normally count. Examples can include certain insurance and financial services, some education and some medical services provided by qualifying health professionals. The exact treatment depends on what is being supplied and the circumstances, so do not assume that a sale is exempt simply because it relates to one of these industries.
If the business makes a mixture of taxable and exempt sales—or you are simply not sure—check the VAT treatment before relying on the turnover calculation.
What changes after registration?
Once registered, the business will normally need to:
- Charge VAT at the appropriate rate
- Issue suitable VAT invoices
- Keep the required digital records
- Submit VAT returns through compatible software
- Pay any VAT due to HMRC
- Retain evidence supporting the figures reported
The registration date matters. VAT may need to be accounted for from that date even if the registration process is completed later.
How FreeAgent can help
FreeAgent can record the VAT treatment applied to invoices, expenses and bank transactions. It uses that bookkeeping information to prepare an MTD-compatible VAT return and can submit the return directly to HMRC.
For the return to be reliable, the VAT settings must be correct and all relevant invoices, bills, expenses and bank transactions must be entered and reviewed. Software can perform the calculations, but it cannot determine whether every transaction has been recorded or whether the VAT treatment chosen is appropriate.
Where VAT return support is included within your Forest Finance service, we will agree what information you need to maintain, review the available records and raise any questions before submission.
Think you may need to register?
Use the Forest Finance VAT checker for an initial indication or tell us about your sales and expected turnover. We can help review whether your sales are taxable, when registration may be required and what needs to be put in place.
Relevant next steps:
Last reviewed: 2 September 2026