VAT Registration for a Limited Company 2026/27: £90,000 Threshold and Corporation Tax
VAT is a separate tax from Corporation Tax, with its own threshold, deadlines and returns, but the two meet in the company's profit. Registering changes what counts as income and what counts as a cost, and for a company selling to the public it can cut profit even as sales grow. This guide covers the registration rules for 2026/27 and works through what VAT does to the Corporation Tax bill and the director's take-home.
Written by James Whitfield · Last reviewed 7 November 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
- A company must register when taxable turnover for the last 12 months goes over £90,000, or will in the next 30 days.1
- Register within 30 days of the end of the month you went over; you charge VAT from the first day of the second month.1
- The £90,000 threshold and the £88,000 deregistration threshold stay the same from April 2027.3
- VAT you charge is not company income and VAT you reclaim is not a cost; unrecoverable VAT is part of the cost.6
A UK limited company must register for VAT if its taxable turnover over any rolling 12 months goes above £90,000, or if it expects to go over £90,000 in the next 30 days alone. Below that, registration is optional. The test is the company's turnover, not its profit, and it is checked every month rather than once a year.
Once registered, the VAT the company charges belongs to HMRC and the VAT on its purchases can usually be reclaimed, so Corporation Tax is worked out on figures without VAT. A company that is not registered counts the VAT it pays on costs as part of those costs.
- ·Registration threshold: £90,000
- ·Deregistration threshold: £88,000
- ·Register within 30 days of month end
- ·Flat Rate Scheme: join at £150,000 or less
Contents ▾
- 1. The rolling 12-month test, month by month
- 2. How VAT changes the Corporation Tax calculation
- 3. Crossing the threshold when your customers are the public
- 4. Voluntary registration and the Flat Rate Scheme
- 5. Worked example: a consultant's company on the Flat Rate Scheme
- 6. Leaving VAT, and what does not change
The rolling 12-month test, month by month
Taxable turnover is everything the company sells that is not exempt from VAT or outside its scope, including zero-rated and reduced-rate sales.1 At the end of every month, add up the last 12 months. If the total is over £90,000, the company must register within 30 days of the end of that month, and its registration takes effect from the first day of the second month after it went over.1
There is also a forward test: if the company expects its turnover in the next 30 days alone to go over £90,000, for example on signing a large contract, it must register by the end of those 30 days, effective from the day it realised.1
| 12 months to the end of June 2026Not over £90,000 | £82,000 |
| 12 months to the end of July 2026Not over £90,000 | £84,000 |
| 12 months to the end of August 2026Not over £90,000 | £86,000 |
| 12 months to the end of September 2026Not over £90,000 | £88,000 |
| 12 months to the end of October 2026Not over £90,000 | £90,000 |
| 12 months to the end of November 2026Over £90,000: must register | £92,000 |
This company sells £6,500 a month until April 2026 and £8,500 a month from May. Its rolling total first goes over £90,000 at the end of November 2026, at £92,000. It must apply by 30 December 2026 and charge VAT from 1 January 2027. If it registers late it still owes VAT on sales from the date it should have been registered, and may be charged a penalty.1
How VAT changes the Corporation Tax calculation
For a registered company, the VAT on its sales is collected for HMRC and the VAT on its purchases is reclaimed, so neither is income or a cost. The accounts and the Corporation Tax computation use figures without VAT.
For a company that is not registered, there is no VAT account. It cannot reclaim VAT on what it buys, so that VAT is part of the price it paid and is deducted with the cost, including on equipment that qualifies for capital allowances.6 A £1,200 laptop bought by an unregistered company is a £1,200 cost; the same laptop bought by a registered company is a £1,000 cost plus £200 reclaimed.
Crossing the threshold when your customers are the public
A company selling to consumers has VAT-inclusive prices, and its customers cannot reclaim VAT. Suppose it sells £88,000 a year, unregistered, with costs of £20,000 plus £4,000 of VAT it cannot reclaim. Its profit before the director's pay is £64,000.
The next year sales grow to £95,000 at the same prices, so it must register. One-sixth of every VAT-inclusive pound is now VAT: £15,833.33 goes to HMRC. It can reclaim the £4,000 on its costs, but profit falls to £59,166.67.
With a £12,570 salary and the rest as dividends, the director's take-home falls from £48,209.08 to £45,488.77, £2,720.31 less, even though sales rose by £7,000. At the same prices, sales would need to reach £100,800 to get back to the old profit.
A company selling mainly to VAT-registered businesses is in a different position: its customers reclaim the VAT, so it can add 20% to its prices without them being worse off, and registering mostly costs administration.
Voluntary registration and the Flat Rate Scheme
A company below £90,000 can register voluntarily.1 It then charges VAT on its sales and reclaims VAT on its costs, which can suit a company selling to VAT-registered businesses or one with large VAT-bearing costs. It also has to keep VAT records and file returns.
The Flat Rate Scheme is open to businesses with VAT-exclusive taxable turnover of £150,000 or less, and they must usually leave once VAT-inclusive turnover is over £230,000 on an anniversary of joining.5 The company still charges 20% to customers but pays HMRC a fixed percentage of its VAT-inclusive turnover, and cannot reclaim VAT on purchases except certain capital assets over £2,000.4 A limited cost business, one whose spending on goods is under 2% of turnover or under £1,000 a year, pays 16.5%; there is a 1% discount in the first year of VAT registration.4
Worked example: a consultant's company on the Flat Rate Scheme
A one-person consultancy charges business clients £80,000 a year plus £16,000 of VAT, £96,000 in total. It spends almost nothing on goods, so it is a limited cost business. Its other costs include £3,000 of standard-rated services carrying £500 of VAT. Its profit before the director's pay, on standard VAT accounting, is £60,000.
| Standard accounting: VAT charged less VAT reclaimed | £15,500 |
| Flat Rate Scheme, first year: 15.5% of the VAT-inclusive turnover | £14,880 |
| Flat Rate Scheme, later years: 16.5% | £15,840 |
Under the scheme, the VAT charged but not paid over to HMRC is taxable income for the company, and the £500 of VAT on costs can no longer be reclaimed, so it becomes part of the cost.56 Taking that into account, with a £12,570 salary and dividends for the rest, in the first year the scheme leaves the director £373.02 better off than standard accounting; in later years it leaves the director £245.80 worse off than standard accounting.
That is why the 16.5% rate makes the scheme unattractive for most service companies once the first-year discount ends. A company with more VAT-bearing costs than this one would find standard accounting further ahead.
Leaving VAT, and what does not change
If taxable turnover falls below £88,000, the company can ask HMRC to cancel its registration.2 It must cancel within 30 days if it stops being eligible, for example when it stops trading.2
Budget 2026 left both thresholds unchanged: £90,000 to register and £88,000 to deregister, from April 2026 and again from April 2027.3 Corporation Tax rates and the director's personal tax are unaffected by registration; what changes is the profit they are charged on.
Frequently asked questions
What is the VAT threshold for a limited company in 2026/27?+
£90,000 of taxable turnover over any rolling 12 months. It is the same threshold as for sole traders and partnerships, and Budget 2026 kept it at £90,000 from April 2027.
Is the VAT threshold based on turnover or profit?+
Taxable turnover: the total value of taxable sales before any costs. A company with £95,000 of sales and £60,000 of costs must register even though its profit is £35,000.
If my company is VAT registered, is Corporation Tax worked out with or without VAT?+
Without. VAT charged on sales is owed to HMRC and VAT on purchases is reclaimed, so neither is income or a cost. A company that is not registered deducts its costs including the VAT it cannot reclaim.
Does the Flat Rate Scheme save money for a contractor's company?+
Rarely after the first year. A contractor's company that buys few goods is usually a limited cost business paying 16.5% of VAT-inclusive turnover, which is close to the full 20% charged, and the VAT kept is taxable income.
Can I deregister if turnover falls?+
Yes, if taxable turnover falls below £88,000 you can ask HMRC to cancel your registration. You must cancel within 30 days if the company is no longer eligible to be registered.
Where these figures come from
The rates and rules on this page are drawn from the official UK government sources below, using the confirmed 2026/27 figures. Each link opens the relevant HMRC, GOV.UK or Companies House page in a new tab.
- Register for VAT: when to register www.gov.uk/register-for-vat
- Register for VAT: cancel your registration www.gov.uk/register-for-vat/cancel-your-registration
- Budget 2026, Annex A: rates and allowances (VAT thresholds from April 2026 and April 2027) www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances
- VAT Flat Rate Scheme: work out your flat rate www.gov.uk/vat-flat-rate-scheme/how-much-you-pay
- HMRC Business Income Manual BIM31585: VAT flat rate schemes www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31585
- HMRC Business Income Manual BIM31535: trader exempt or not registered for VAT www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31535
- Corporation Tax rates and reliefs www.gov.uk/corporation-tax-rates
Estimate your limited company tax
The limited company tax calculator turns this guidance into a concrete estimate for corporation tax, dividends and personal take-home, based on 2026/27 HMRC rates.