Going Over the VAT Threshold Mid-Year: What Your Limited Company Must Do

A limited company that crosses the VAT threshold mid-year must notify HMRC within 30 days of the end of the month in which its rolling 12-month taxable turnover first exceeded £90,000, and must start charging VAT from the first day of the second month after the breach. The obligation is triggered by a rolling 12-month test, not by your accounting year, which is why so many companies cross the line mid-year without realising it. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, handles this transition for growing companies throughout the year.

This guide covers the two tests that trigger VAT registration for a limited company in the UK, the deadlines and effective dates, which of the small business VAT schemes to consider, what registration does to your margins, and what you can reclaim on pre-registration purchases.

Key Takeaways

• The VAT threshold 2026/27 in the UK is £90,000 of taxable turnover in any rolling 12-month period, and the deregistration threshold is £88,000.
• A limited company must notify HMRC within 30 days of the end of the month in which the £90,000 threshold was exceeded, and VAT is chargeable from the first day of the second month following the breach.
• A separate forward-look test applies: if a company expects taxable turnover to exceed £90,000 in the next 30 days alone, it must register immediately and charge VAT from the date that expectation arose.
• Late VAT registration attracts a failure to notify penalty based on the VAT that should have been paid, and the company remains liable for the VAT it failed to charge its customers.
• The Flat Rate Scheme is open to companies expecting taxable turnover of £150,000 or less, while the Cash Accounting and Annual Accounting Schemes are open up to £1.35 million.
• VAT on goods still held at registration can be reclaimed for up to four years before registration, and VAT on services for up to six months before registration.

When must a limited company register for VAT after crossing the threshold mid-year?

VAT registration becomes compulsory for a limited company in the UK as soon as its taxable turnover in any rolling 12-month period exceeds £90,000. The word "rolling" is what catches directors out. HMRC does not look at your company's financial year or at the tax year ending 5 April. At the end of every calendar month you should add up taxable turnover for that month and the 11 months before it, and check the total against the VAT threshold 2026/27 figure of £90,000.

Taxable turnover means everything you sell that is not exempt from VAT. It includes zero-rated and reduced-rate sales, so a company with substantial zero-rated income can be obliged to register even though it will charge little or no output VAT.

There is a second, separate trigger. If at any point you reasonably expect taxable turnover to exceed £90,000 in the next 30 days alone, you must register straight away. A company signing a single £120,000 contract due to be invoiced within the month is caught by this forward-look test whatever its previous 12 months looked like.

For a full overview of how VAT works for an incorporated business, see our guide to VAT for limited companies.

What is the deadline, and when does the company start charging VAT?

The notification deadline is 30 days from the end of the month in which the threshold was crossed, and the effective date of registration is the first day of the second month after the breach. These are two different dates, and confusing them is the most common source of unexpected VAT bills.

Take a Guildford-based design company with a 31 March year end. Its taxable turnover for the 12 months to 30 September 2026 reaches £94,300, crossing the threshold for the first time. The company must notify HMRC by 30 October 2026, and its effective date of registration is 1 November 2026. Every sale invoiced from 1 November onwards must carry VAT, even if HMRC has not yet issued the VAT number. The usual approach is to invoice the net amount and issue a proper VAT invoice once the number arrives.

Under the forward-look test the mechanics differ: registration takes effect from the date you formed the expectation, not from a later month. Separately, if the breach was a one-off and you can show HMRC that taxable turnover for the next 12 months will fall below the £88,000 deregistration threshold, you can apply for an exception from registration.

A company growing fast enough to cross the VAT threshold is often approaching a change in its tax rate too, as our guide to corporation tax rates and thresholds explains.

Which of the small business VAT schemes should the company choose?

The right scheme depends on how much VAT the company incurs on purchases and how quickly its customers pay. Three are worth assessing at the point of registration.

The Flat Rate Scheme lets a company pay a fixed percentage of VAT-inclusive turnover to HMRC instead of accounting for output and input VAT separately, and is open to companies expecting taxable turnover of £150,000 or less excluding VAT. Since the introduction of the 16.5% limited cost trader rate, most service companies with few purchases of goods gain nothing from it.

The Cash Accounting Scheme allows the company to account for VAT when invoices are paid rather than when they are issued, protecting cash flow where customers are slow or bad debts are a risk. It is available up to £1.35 million of taxable turnover.

The Annual Accounting Scheme replaces quarterly returns with one annual return plus instalments, again available up to £1.35 million. It reduces administration but gives up the timing benefit of quarterly repayment claims.

Whichever scheme is chosen, every VAT-registered company must keep digital records and file through Making Tax Digital compatible software.

How does going over the VAT threshold affect your pricing?

VAT registration reduces your effective margin on sales to customers who cannot reclaim VAT, and leaves margin untouched on sales to VAT-registered businesses. That distinction should drive your pricing decision.

Consider the same design company, previously charging £600 for a project. If the client is a VAT-registered business, the company invoices £600 plus £120 VAT, the client reclaims the £120, and nothing changes commercially. If the client is a consumer or an unregistered trader, the company must either raise the price to £720, risking the work, or hold the price at £600 and treat it as VAT inclusive. Holding the price leaves £500 of net income and £100 payable to HMRC, cutting revenue on that job by 16.7%.

Against that, the company can now recover input VAT. If it spends £18,000 a year plus VAT on software, subcontractors and equipment, it reclaims £3,600 that was previously a sunk cost. A company selling mainly to businesses often finds registration mildly positive overall.

What can you reclaim, and what happens if you register late?

Pre-registration VAT is recoverable on goods still held at the effective date of registration going back four years, and on services received in the six months before registration. Stock, laptops, tools and unsold inventory usually qualify; a marketing retainer from two years ago does not. Keep the original VAT invoices, because HMRC requires them to support the claim on the first return.

Late registration is the more expensive problem. If a company should have registered from 1 November 2026 but only does so the following June, HMRC treats it as VAT registered from 1 November regardless. The company owes output VAT on everything invoiced since that date. Where customers are consumers who will not accept a retrospective VAT charge, the company must treat past sales as VAT inclusive and absorb the cost. On £70,000 of sales in that period, the VAT due is £11,667.

A failure to notify penalty is then charged as a percentage of that lost revenue under Schedule 41 of the Finance Act 2008, reduced where the disclosure is unprompted and the company cooperates. Monitoring turnover monthly is far cheaper than unwinding a late registration.

Frequently Asked Questions

What is the VAT threshold for a limited company in 2026/27?

The VAT threshold 2026/27 for a limited company in the UK is £90,000 of taxable turnover in any rolling 12-month period in the 2026/27 tax year. The deregistration threshold is £88,000. The test applies to taxable turnover, which includes zero-rated and reduced-rate sales but excludes VAT-exempt income such as most insurance and financial services.

How long do I have to register for VAT after going over the threshold?

You have 30 days from the end of the month in which your rolling 12-month taxable turnover exceeded £90,000 to notify HMRC. VAT registration then takes effect from the first day of the second month after the breach. For example, a company crossing the threshold in September 2026 must notify by 30 October 2026 and is registered from 1 November 2026.

Do I have to charge VAT before my VAT number arrives?

Yes. VAT is due on all sales from your effective date of registration even if HMRC has not yet issued your VAT number. You cannot show VAT separately on an invoice without a number, so the usual approach is to invoice a higher gross amount, or invoice the net figure and issue a VAT invoice once the number arrives.

Can I avoid VAT registration if going over the threshold was a one-off?

You can apply to HMRC for an exception from registration if you can demonstrate that your taxable turnover for the following 12 months will fall below the £88,000 deregistration threshold. The application must be made at the time and supported by evidence, such as the loss of a contract. HMRC will confirm in writing whether the exception is granted.

Should my limited company join the Flat Rate Scheme when it registers?

Only if its flat rate percentage produces a lower VAT bill than standard accounting. Companies expecting taxable turnover of £150,000 or less can join, but service businesses spending less than 2% of VAT-inclusive turnover on goods must use the 16.5% limited cost trader rate, which usually removes the benefit. Compare both methods on your own figures before applying.

How Blue Tick Can Help

Blue Tick Accountants advises limited company owners on the exact point at which VAT registration becomes compulsory, handles the registration itself, and models the effect on pricing and margin before the first return falls due. The practice also reviews whether the Flat Rate, Cash Accounting or Annual Accounting Scheme leaves your company better off, and makes sure pre-registration VAT is recovered in full. Head to our website and book a meeting now.

Conclusion

Crossing the VAT threshold mid-year is a monthly monitoring problem, not an annual one. Add up your rolling 12-month taxable turnover at each month end, and act within 30 days of the month in which it passes £90,000. The companies that get hurt are the ones that discover the breach months later and have to absorb VAT they never charged. If your turnover is approaching £90,000, decide now how you will handle pricing and which scheme suits your business.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps limited company owners, landlords and the self-employed across the UK with VAT registration, planning and compliance. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.