Do I need to charge VAT?

Most small UK businesses are not VAT registered, and that is completely normal. This guide is about the decision: whether you have to register, when, and whether you might want to anyway. If you already know you are not registered and just need to get the invoice right, go straight to invoicing when you’re not VAT registered.

The two tests

You must register for VAT if either of these is true:

• The backward look. Your VAT taxable turnover over the last 12 months goes over £90,000. This is a rolling window checked at the end of every month — not your tax year, and not your accounting year.
• The forward look. You expect your taxable turnover to go over £90,000 in the next 30 days alone. One large contract can trigger this on its own, even if you have never been close before.

The £90,000 figure has applied since 1 April 2024.

What the rolling window actually means

Say you turn over roughly £7,000 a month, then have a strong summer:

Period	Turnover
Oct 2025 – Jun 2026 (9 months)	£63,000
Jul 2026	£11,000
Aug 2026	£12,000
Sep 2026	£9,000
12 months to 30 Sep 2026	£95,000

You crossed the threshold in September — in a month that felt ordinary — because the test looks back across all twelve. Check the running total at each month end rather than waiting for your year end, which is how most people miss it.

The deadlines, which are tighter than people expect

Under the backward look, you must register within 30 days of the end of the month in which you went over. Your registration then takes effect from the first day of the second month after you crossed it. In the example above — over on 30 September — you must register by 30 October, and you are VAT registered from 1 November.

Under the forward look, you must register by the end of that 30-day period, and registration takes effect from the date you realised you would cross it, not the date the money actually arrives.

That second rule catches people out. If you sign a £100,000 contract today, your effective date is today, and every invoice you raise from now on needs VAT on it — even though you may be waiting weeks for a VAT number. The usual fix is to raise invoices for the VAT-inclusive amount and reissue them as proper VAT invoices once the number arrives.

Late registration means HMRC can charge you a penalty, and you will still owe the VAT on sales you made after your effective date — whether or not you charged it. That VAT comes out of your own margin.

What counts towards the £90,000

Taxable turnover means your total sales, before any costs are deducted. It is not profit.

Counts: standard-rated sales (20%), reduced-rated sales (5%) and zero-rated sales (0%). Zero-rated is still taxable — this surprises people who sell mostly zero-rated goods.

Does not count: VAT-exempt sales, and sales that are outside the scope of UK VAT — for instance most services supplied to business customers abroad.

If you go over temporarily, you can ask HMRC for an exception from registration, showing that your turnover will drop back below the £88,000 deregistration threshold. HMRC decides whether to grant it, so report the breach on time regardless.

Registering voluntarily: the real trade-off

You can register below the threshold, and whether it helps comes down to a single question — can your customers reclaim VAT?

If you sell to VAT-registered businesses, adding VAT costs them nothing, because they reclaim it. Meanwhile you start reclaiming VAT on your own purchases: stock, tools, a laptop, software subscriptions, fuel. Registration is close to free money, and it removes the awkward signal that your turnover is under £90,000.

If you sell to consumers — householders, private clients — they cannot reclaim anything. Registering means either putting your prices up 20% or absorbing the VAT yourself. For a domestic cleaner, gardener or decorator, that is a real cut in earnings for no gain.

Either way, registration brings obligations: VAT returns, digital record-keeping under Making Tax Digital, and the accounting to support it.

What changes the day you register

• You charge VAT at the correct rate on your sales.
• Your invoices must meet the full rules — see what a VAT invoice must include.
• You display your VAT number on your invoices.
• You file VAT returns and keep digital records.
• You can reclaim VAT on business purchases, and often on some bought shortly before registration.

Quick check

• Rolling 12-month turnover under £90,000, not registered by choice → no VAT. Use the non-VAT invoice generator.
• Over £90,000, or expecting to be within 30 days → register, then charge VAT and follow the full invoice rules.
• Under the threshold but selling mainly to VAT-registered businesses → registering voluntarily is worth costing out.

Check the current rules on GOV.UK before you act — thresholds change at fiscal events — and speak to an accountant if your position is close to the line.