The VAT Registration Threshold: Watching Your Rolling 12 Months

Most tax deadlines arrive on a date you can put in a diary. The VAT registration threshold does not. It is triggered by a number that moves every month, not by the end of a tax year. A shop that grows steadily can go from comfortably below the line to legally obliged to register without any single dramatic month, and the only way to see it coming is to check a rolling total.

This guide explains how HMRC's test works, using GOV.UK and HMRC's VAT notices as read in October 2026: the figures, the month-end test, the 30-day look-ahead, the deadlines, voluntary registration, the Flat Rate Scheme, and how eBay fits in. Thresholds can change, so check the figures on GOV.UK before acting.

1. The numbers: £90,000 in, £88,000 out

GOV.UK's guide to registering for VAT states the registration rule in two parts. You must register if your total taxable turnover for the last 12 months goes over £90,000 (the VAT threshold), or if you expect your taxable turnover to go over £90,000 in the next 30 days. HMRC's supplement to VAT Notice 700/1, updated on 5 August 2026, gives the current registration threshold for taxable supplies as £90,000 and the current deregistration limit as £88,000. Its tables show the registration limit was £85,000 for each year from 1 April 2017 to 31 March 2024, and £90,000 from 1 April 2024; for deregistration the figures were £83,000 and then £88,000. HMRC's press release launching its VAT Registration Estimator in July 2024 says the same change: until 31 March 2024 the threshold was £85,000.

If you are based outside the UK and supply goods to the UK, GOV.UK says you must register regardless of taxable turnover. This guide is for UK-established sellers.

2. What counts as taxable turnover

GOV.UK defines taxable turnover as the total value of everything you sell that is not VAT exempt or "out of scope". It includes zero-rated, reduced-rated and standard-rated goods, and goods you bartered, part-exchanged or gave as gifts. HMRC's notice adds that taxable turnover is the total value of all taxable supplies, including the zero-rated ones, and that you do not need to include sales of capital assets such as equipment or vehicles, or exempt supplies.

Three consequences follow for a dropshipper.

• It is turnover, not profit. Sell £10,000 of goods that cost you £8,500 and your taxable turnover is £10,000. A thin margin does not slow you down.
• It is the value of your sales, not your payouts. eBay deducts its fees before paying you, so a payout is lower than the value of what you sold. Start from gross sales. Our guide to reading the eBay Transaction report shows where the gross figures are.
• The test is about your business, not your eBay account. HMRC's notice talks about the value of your taxable supplies, so do not test each sales channel separately.

The pages read for this guide do not say how postage charged to buyers is counted, so if it is a large share of your takings, check with HMRC or an accountant.

3. The rolling 12-month test, month by month

HMRC's VAT Notice 700/1 explains when you are liable to register: at the end of any month, the value of your taxable supplies in the previous 12 months or less is over the registration threshold. "Or less" covers businesses under a year old.

That means you need a table with one row per month and a running 12-month total. Here is an illustrative example (the figures are made up). Taxable sales by month, in pounds:

The full run of monthly sales is 4,000; 4,500; 5,000; 5,500; 6,000; 6,500; 7,000; 7,500; 8,000; 8,500; 9,000; 9,500; 10,500; 11,000. Working it through:

• At the end of month 12 the total of months 1 to 12 is £81,000.
• At the end of month 13, month 1 drops out and month 13 comes in: £81,000 - £4,000 + £10,500 = £87,500.
• At the end of month 14, month 2 drops out and month 14 comes in: £87,500 - £4,500 + £11,000 = £94,000.

The shop crossed £90,000 at the end of month 14, though no single month was extraordinary and the first twelve never came close. Small old months dropping out do not protect you when the new months are bigger.

Worth remembering: the window rolls forward every month. Being below £90,000 for the last tax year tells you nothing; the only question is the 12 months ending at the last month-end.

Build the check into your month-end routine. A spreadsheet with 12 monthly figures and a SUM is enough. HMRC also provides a VAT Registration Estimator tool, which it says can help any business see what registering could mean, including those below the threshold considering voluntary registration.

4. The 30-day look-ahead

The second trigger is forward-looking. HMRC's notice says you are also liable to register if, at any time, you expect the value of your taxable supplies in the next 30-day period alone to go over the registration threshold. This is separate from the rolling test. GOV.UK's example is a business that arranges a £100,000 contract on 1 May, to be paid at the end of May: it must apply by 30 May, and its effective date of registration is 1 May, the date it realized.

For most eBay sellers this is rare, since £90,000 in 30 days would be a dramatic jump, but a very large bulk order could do it. The key difference is the registration date: it is the date you first expected to cross.

5. After you cross: deadlines and dates

For the rolling test, GOV.UK says you must register within 30 days of the end of the month when you went over the threshold, and that your effective date of registration is the first day of the second month after you went over. GOV.UK's example: on 15 July your taxable turnover for the last 12 months goes over £90,000 for the first time. You must register by 30 August, and your effective date is 1 September. HMRC's notice sets out the same pattern in a table: if the previous 12 months went over the threshold on 31 August, you apply by 30 September and the registration date is 1 October. For the look-ahead, expecting to cross in the next 30 days on 20 January means applying by 18 February, with a registration date of 20 January.

For our illustrative shop, if month 14 ended on 30 September, the application is due by 30 October and the registration date is 1 November, so you should be planning the price change before then.

If you register late

GOV.UK says that if you register late you must pay VAT on any sales you have made since the date you should have registered, and might also pay a penalty depending on how much you owe and how late you are. The simple defense is the month-end check.

If the excess is temporary

HMRC's notice describes "exception from registration": you may not have to register if, at the end of the month, your taxable supplies went over the threshold in the last 12 months but you can show HMRC that they will not go over the deregistration threshold in the next 12 months. You apply to HMRC to make this official, send the application as early as possible, and keep checking monthly, since an exception does not mean you will never need to register. If HMRC does not accept it, it registers you from the day you were liable.

To apply, HMRC's notice says to use the online VAT registration service, where you estimate your taxable turnover for the 12 months from the registration date, using the previous 12 months as a starting point.

6. What registering does to your prices

Once registered you must charge VAT on taxable sales. GOV.UK says standard rate is currently 20%, and gives the arithmetic: to add 20% multiply the VAT-exclusive price by 1.2, and to remove it divide by 1.2. Invoices must show your VAT number and the VAT separately.

Worked example (illustrative). A listing is £60.00 including postage, and you are not registered, so you keep all £60.00. After registration you have two broad choices.

• Keep the price at £60.00. Then £60.00 divided by 1.2 is £50.00 of sales and £10.00 of VAT to pay HMRC. You lose a sixth of the price.
• Raise the price to £72.00. £60.00 x 1.2 = £72.00. You keep £60.00 and collect £12.00 of VAT, but the buyer pays 20% more, and competitors who are not registered may now look cheaper.

In return you can reclaim VAT on items you buy for the business. GOV.UK says you do this on your VAT return, with valid VAT invoices and records, and only the business proportion of anything partly personal. If stock costs £30.00 including VAT, the VAT is £30.00 - (£30.00 / 1.2) = £30.00 - £25.00 = £5.00, and your supplier's invoice must show it.

The net effect on margin depends on whether your suppliers charge you VAT. Run your real numbers through our eBay fee calculator and read the pricing guide. Our guide to eBay UK fees covers the rates, and you should check on eBay's own fee page how VAT applies to them.

7. Registering before you have to

GOV.UK says you can choose to register if your turnover is below £90,000, and that you must pay HMRC any VAT you owe from the date they register you. HMRC's notice says you may only register if you are in business, which it defines as a continuing activity carried on with the intention of making supplies for a consideration, and that you can also apply before you start making taxable supplies.

The upside is reclaiming VAT on stock and costs. The cost is charging VAT on every sale and filing returns: HMRC's notice says once registered you must submit a VAT Return for every period, even if you have no VAT to pay or reclaim, and GOV.UK says returns are usually every 3 months and that VAT-registered businesses should now be signed up for Making Tax Digital for VAT.

HMRC's notice adds that a voluntary registration can be backdated by up to 4 years, but then you must account for VAT on all reduced-rate and standard-rate supplies from that date, and you cannot change the start date once registered. GOV.UK also says you can reclaim VAT paid before registering on goods bought within 4 years that you still have (or that were used to make other goods you still have), and on services bought within 6 months, if they relate to the taxable business.

The sole trader versus limited company question can interact with this; see sole trader or limited company.

8. The Flat Rate Scheme in outline

The Flat Rate Scheme lets a small business pay HMRC a fixed percentage of its VAT-inclusive turnover instead of working out VAT on every purchase and sale. GOV.UK sets out the basics:

• You may be able to join if you are VAT registered and expect your VAT taxable turnover to be £150,000 or less, excluding VAT, in the next 12 months.
• You pay a fixed rate to HMRC and keep the difference between what you charge customers and what you pay HMRC.
• You cannot reclaim VAT on purchases, except certain capital assets over £2,000.
• You get a 1% discount in your first year as a VAT-registered business.
• If your goods cost less than 2% of your turnover, or £1,000 a year (if your costs are more than 2%), you are a "limited cost business" and pay 16.5%.
• The payment is your flat rate multiplied by your VAT inclusive turnover. You must leave if no longer eligible, for example if on the anniversary of joining your turnover in the last 12 months was more than £230,000 including VAT. You can leave at any time but must wait 12 months to rejoin.

GOV.UK's table has a "Retailing not listed elsewhere" rate of 7.5% and other retail rates, and the rate depends on your business type, so confirm which category applies to you with HMRC.

Stock-heavy sellers: do the sums before joining (illustrative)

Take a shop with £100,000 of VAT-exclusive sales. VAT-inclusive turnover is £100,000 x 1.2 = £120,000. Say stock costs £70,000 before VAT.

• Standard VAT accounting: output VAT £120,000 - £100,000 = £20,000; input VAT on stock £70,000 x 0.2 = £14,000; payable £20,000 - £14,000 = £6,000.
• Flat Rate Scheme at an illustrative 7.5%: £120,000 x 0.075 = £9,000. In the first year at 6.5%: £120,000 x 0.065 = £7,800.

In this example the scheme costs £3,000 more than standard accounting, or £1,800 more in the first year, because it removes the right to reclaim VAT on a large stock bill. The scheme tends to suit businesses with few purchases; a dropshipper with high product costs should test it before applying. The real answer depends on your costs and rate.

9. Where eBay fits in

• Your VAT number goes on your account. eBay UK's VAT help page says it is mandatory to display your VAT identification number on eBay in connection with your listings, which you do through your business seller information, and that a VAT ID can be added in account preferences.
• Wrong VAT details can hurt. The same page says that if eBay determines you are not meeting your VAT obligations, or you provide incorrect information, your account may be blocked from selling and active listings may be removed.
• Imports and eBay collecting VAT. eBay says it collects UK VAT on goods imported with a parcel value of up to £135, among other cases. If your stock is imported, read eBay's page and GOV.UK.

Our broader guide to VAT for UK dropshippers covers what changes day to day.

10. Leaving VAT

GOV.UK says you must cancel your registration if you are no longer eligible, for example if you stop trading, and you must cancel within 30 days or you might be charged a penalty. If your taxable turnover falls below £88,000 you can ask HMRC to cancel. HMRC's supplement states that you cannot apply for retrospective cancellation of registration due to reduced turnover. HMRC usually confirms within 40 working days; you must stop charging VAT from the cancellation date, keep VAT records for 6 years and submit a final VAT return. GOV.UK also says you may have to account for stock and other assets you hold on that date, so read the page before canceling.

11. A month-end routine

1. Pull gross taxable sales for the month from your Transaction report, plus any other channels.
2. Add the month to your 12-row table and recalculate the rolling total.
3. Ask whether anything in the next 30 days could take you over on its own.
4. If you have crossed, note the application deadline and the registration date, and plan the price change.

12. Common mistakes

• Using the tax year, or the calendar year, instead of the last 12 months.
• Testing profit or payouts instead of the value of sales.
• Checking quarterly. The notice says month-end.
• Joining the Flat Rate Scheme without comparing it to standard accounting on a stock-heavy business.
• Relying on an old article: the thresholds changed in April 2024.

Sources and how we checked

Facts in this guide were checked against these official pages in October 2026. Rules and figures change, so confirm anything that affects a decision. This is general information, not legal or tax advice.

• Register for VAT: when to register (GOV.UK)
• Cancel your VAT registration (GOV.UK)
• VAT Notice 700/1: should I be registered for VAT (HMRC)
• VAT Notice 700/1 supplement: thresholds (HMRC)
• HMRC launches VAT Registration Estimator (GOV.UK)
• Charge, reclaim and record VAT (GOV.UK)
• Reclaim VAT on business expenses (GOV.UK)
• How VAT works (GOV.UK)
• VAT Flat Rate Scheme (GOV.UK)
• Work out your flat rate (GOV.UK)
• Your VAT obligations in the UK and EU (eBay UK)

Questions people ask