VAT Threshold Calculator UK

UK VAT Registration Threshold 2025/26: What Freelancers Need to Know

The VAT registration threshold for 2025/26 is £90,000. This was increased from £85,000 in April 2024 — the first increase since 2017.

You must register for VAT if:

• Your taxable turnover exceeded £90,000 in the last 12 months (the "historical test")
• You expect your turnover to exceed £90,000 in the next 30 days alone (the "future test")

You can choose to register voluntarily at any turnover level. This is sometimes worthwhile — we'll explain when.

How the Rolling 12-Month Test Works

HMRC doesn't check your turnover by tax year or calendar year. They use a rolling 12-month period — any consecutive 12 months. This means you need to check at the end of every month whether your turnover for the previous 12 months has exceeded £90,000.

What Counts as "Taxable Turnover"?

Your taxable turnover includes all sales that are not VAT-exempt. For most freelancers, this is essentially all your invoiced revenue. It does not include:

• Exempt supplies (e.g., insurance, education, health services)
• Sales of capital assets
• Income from employment (PAYE)

Standard VAT vs Flat Rate Scheme

Once registered, you have two main options:

• Standard scheme: Charge 20% VAT to clients, reclaim VAT on business purchases, pay the difference to HMRC. Best if you have significant expenses.
• Flat Rate Scheme: Charge 20% VAT to clients, but pay HMRC a fixed percentage of your VAT-inclusive turnover (rate depends on industry). Can't reclaim VAT on purchases (except capital assets over £2,000). Simpler bookkeeping but may cost more if you're a "limited cost trader".

When Voluntary Registration Makes Sense

1. Most clients are VAT-registered businesses — They can reclaim the VAT you charge, so it doesn't cost them anything extra. And you can reclaim VAT on your expenses.
2. Significant VAT-able expenses — If you spend heavily on equipment, software, or supplies with VAT, registration lets you reclaim 20% of those costs.
3. Credibility — Some clients expect businesses above a certain size to be VAT-registered. It can signal professionalism.
4. Approaching the threshold — If you're at £75k+, register proactively rather than scrambling when you hit £90k.

When Voluntary Registration Doesn't Make Sense

1. Selling to consumers — They can't reclaim VAT, so your prices effectively increase 20% (or you absorb the cost).
2. Low expenses — Little VAT to reclaim means registration is all cost and no benefit.
3. Admin burden — Quarterly VAT returns, Making Tax Digital compliance, and more complex bookkeeping.

Related Free Tools

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