For most tradespeople, VAT is the tax you can safely ignore — right up until the day you can’t. Cross the threshold without registering and HMRC can hit you with a penalty and a backdated VAT bill on work you’ve already been paid for. Here’s exactly when you need to act, in plain English.
The short answer
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. That’s the only test that forces you to register. If you’re comfortably under it, you don’t have to do anything — though you can choose to register voluntarily (more on that below).
What “rolling 12 months” actually means
This trips a lot of people up. The threshold is not based on your tax year or the calendar year. You have to look back over the last 12 months on a rolling basis — so at the end of every month, add up your taxable turnover for that month plus the previous eleven. The moment that running total passes £90,000, the clock starts.
There’s also a forward-looking test: if you know your turnover will go over £90,000 in the next 30 days alone — say you’ve just landed one big contract — you must register straight away.
The deadlines (and the penalty trap)
- If you exceed the threshold on a rolling basis, you must register within 30 days of the end of the month in which you went over.
- If you trip the forward-looking test, you must register by the end of that 30-day window.
- Miss the deadline and HMRC can charge a late-registration penalty and require you to account for the VAT you should have charged from the date you should have registered — even if you never actually charged your customers.
That last point is the painful one: the VAT comes out of money you’ve already spent. This is why watching your rolling turnover matters.
Is the threshold different for sole traders?
No. There is no separate threshold for sole traders, the self-employed or tradespeople specifically. The £90,000 figure applies to everyone — sole trader, partnership or limited company alike. The type of business you run doesn’t change the number.
Should you register voluntarily?
You can register before you hit £90,000. Whether it’s worth it depends almost entirely on who your customers are:
| Mostly... | Voluntary VAT registration is... |
|---|---|
| Commercial / VAT-registered clients | Often worth it — they reclaim the VAT you charge, so your prices effectively don’t go up, and you reclaim VAT on your own tools, van and materials. |
| Private homeowners | Usually not worth it — they can’t reclaim VAT, so adding 20% makes you 20% more expensive overnight against unregistered rivals. |
Voluntary registration can also make a young business look more established, and lets you reclaim VAT on big start-up purchases. Weigh it against the extra admin of quarterly VAT returns.
What changes once you’re registered
- You add 20% VAT to your invoices (most trade work is standard-rated; some construction work qualifies for reduced or zero rates).
- You file VAT returns, normally quarterly, under Making Tax Digital for VAT — which means keeping digital records and filing through compatible software.
- You can reclaim VAT on business purchases.
- Your invoices must show your VAT number and the VAT breakdown.
If this is on your horizon, it’s worth reading our guide to Making Tax Digital for sole traders, since the digital record-keeping rules overlap.
How Yoley helps
Yoley lets you toggle VAT on or off per quote and invoice, set your VAT number once so it appears on every document, and keep a clean digital record of every invoice and expense — exactly the kind of record-keeping VAT and MTD require. When you do cross the threshold, you’re not scrambling to reconstruct a year of paperwork. And it’s all on the free plan.