Tax
Approaching the VAT threshold: what to do before you cross it
VAT registration changes your pricing, your admin and your cash flow. Preparing early can make the administration easier to manage.
21 July 2026 · 6 min read
VAT registration is compulsory once your taxable turnover over any rolling 12-month period exceeds the registration threshold, or when you expect taxable turnover in the next 30 days alone to exceed the threshold. The rolling nature is the part that trips businesses up: it is not your financial year.
What actually changes
- You charge VAT on your sales at the applicable rate and issue VAT invoices.
- You reclaim VAT on eligible business purchases.
- You file returns, usually quarterly, under Making Tax Digital using compatible software.
- VAT collected is not your money; it sits in your account until it is due.
The pricing question
If your customers are VAT-registered businesses, adding VAT is largely neutral to them because they reclaim it. If you sell to consumers, VAT is a real price increase unless you absorb it, which reduces your margin. Deciding which of those you will do, and communicating it well before registration, prevents an awkward month.
Choosing a scheme
Standard accounting suits most businesses. Cash accounting can help if customers pay slowly, because you account for VAT when you are paid rather than when you invoice. Annual accounting reduces filing frequency. The right choice depends on your margins, your purchases and your payment cycle.
The best time to look at this is three to six months before you expect to cross the threshold, while you still have room to plan.
This article is general information, not advice for your specific circumstances. Check current requirements before acting. Our team can help you understand how the topic relates to your business and agree any support you need.