VAT
Should I Register for VAT? B2B vs Consumer Business Examples
You must normally register when taxable turnover for the previous rolling 12 months goes over £90,000, or when you expect to exceed £90,000 in the next 30 days alone. Below the threshold you can register voluntarily, but whether that is commercially sensible depends on your customers, pricing and recoverable input VAT.
Two businesses can have the same £85,000 turnover and need opposite VAT strategies
Imagine two businesses.
Business A: IT consultant
Most customers are VAT-registered companies. If the consultant charges £1,000 + VAT, many customers can normally recover the VAT. Voluntary registration may therefore have less effect on the customer’s true cost, while allowing the consultant to recover eligible input VAT.
Business B: hairdresser
Most customers are private individuals. If a £50 haircut becomes £50 + VAT, the consumer usually cannot recover that VAT. The business may need to increase the customer price or absorb some VAT from its existing price, reducing margin.
The compulsory VAT test is rolling, not your accounting year
You must normally register if taxable turnover for the last 12 months goes over £90,000. This is a rolling 12-month test checked at the end of each month. There is also a separate forward-looking rule if you expect taxable turnover to exceed £90,000 in the next 30 days alone.
| Situation | What the rule looks at | Why it matters |
|---|---|---|
| Historic test | Taxable turnover in the previous rolling 12 months | You can cross the threshold before your financial year ends. |
| Forward test | Expected taxable turnover in the next 30 days | A single large contract can trigger registration even if the previous 12 months were below £90,000. |
| Voluntary registration | Business chooses to register below the threshold | Commercial benefit depends heavily on customers and recoverable input VAT. |
What counts towards the £90,000?
The VAT test uses taxable turnover, including standard-rated, reduced-rated and zero-rated supplies. Exempt and genuinely out-of-scope supplies are treated differently. That is why a business with £100,000 of total receipts is not automatically in the same VAT position as another £100,000 business.
What if you only exceeded the threshold temporarily?
HMRC has a formal registration-exception route where the rolling threshold has been exceeded but the business can show taxable supplies are expected to fall below the deregistration threshold over the next 12 months. This is an application to HMRC, not something to assume automatically.
What people commonly get wrong
The historic test rolls every month.
The VAT tax point and turnover rules need to be considered properly. Registration liability is not simply based on the bank balance.
For a B2C business, the pricing effect can be more important than any perception of scale.
Both may charge no VAT to the customer, but their treatment for taxable turnover and input VAT is not the same.
If turnover is approaching £90,000, do not start by asking whether VAT is “good” or “bad”. First classify the sales, identify who the customers are, test the rolling 12 months, look at upcoming contracts and estimate recoverable input VAT. Then the commercial answer becomes much clearer.
Need help with this?
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Official sources
Reviewed by
Sandip Vadher, PhD FCCA
Founder of SV&Co Accountancy. Fellow Chartered Certified Accountant with more than 20 years of finance and accountancy experience.
Last reviewed: 16 August 2026