What counts towards the £90,000?
Your VAT taxable turnover: the total value of everything your company sells that is not exempt from VAT or outside its scope entirely. That is your sales, not your profit. A company that sells £95,000 of work but only keeps £20,000 after costs is still over the threshold, because the test looks at what came in, not what was left.
The rolling 12 months trap
This is the bit almost everyone gets wrong, so let us spell it out. The £90,000 is measured over any rolling 12 months, not a calendar year, not the tax year, and not your company's accounting year. The clock never resets. At the end of every month you look back at the last 12 months of sales, and if that total has crept over £90,000, the duty to register has been triggered.
Here is a plain worked example. Your company invoices £7,000 a month from January to October: that is £70,000, comfortably under. Then you land a busy patch and invoice £12,000 in November and £12,000 in December. Look back from 31 December and the last 12 months add up to £94,000. You went over the threshold in December, so you must register within 30 days of the end of that month, which means by 30 January, and your registration starts on 1 February. No tax year boundary saved you, because no tax year boundary exists in this test.
That is why it pays to add up your last 12 months of sales at the end of each month once you get anywhere near £90,000. Five minutes with a calculator beats a backdated VAT bill.
When must you register? The two tests
Test 1: looking back. Your VAT taxable sales in the last 12 months went over £90,000. Register within 30 days of the end of the month it happened, and you are VAT registered from the first day of the second month after.
Test 2: looking forward. You expect your sales to go over £90,000 in the next 30 days alone. This one catches sudden wins: sign a single £100,000 contract that starts next week and the duty bites on the day you realise, not later. You must register by the end of those 30 days, and you are registered from the day you realised.
Register late and the cost is real: you must pay the VAT on the sales you made from the date you should have been registered, even though you never charged your customers a penny of it, and a penalty can land on top. One small mercy: if your sales only popped over the threshold temporarily, you can ask for an exception rather than registering.
Should you register voluntarily below £90,000?
You are allowed to register even when you are under the threshold, and some small companies do. The honest picture has two sides.
Why some do it. Once registered you can reclaim the VAT your company pays on its own costs, such as equipment, software and stock, which is worth having if those costs are chunky. Some directors also feel a VAT number makes a young company look more established.
What it costs you. You must add VAT to your prices, and if your customers are ordinary people who cannot claim it back, that makes you roughly 20% more expensive overnight. You also take on VAT returns, usually one every 3 months, and the record keeping that goes with them.
The rough rule of thumb: if your customers are mostly VAT registered businesses, they reclaim the VAT you charge, so registering hurts nobody and lets you reclaim on costs. If your customers are the public, think hard before volunteering. And if it stops suiting you, you can ask HMRC to cancel your registration once your taxable sales fall below £88,000.
How does VAT relate to Corporation Tax?
It does not, and that is the whole point of this section. Corporation Tax is a tax on your company's profit, settled once a year through a Company Tax Return. VAT is a tax on sales that registered businesses collect from their customers and pass on through returns usually every 3 months. Separate taxes, separate registrations, separate returns, separate deadlines. Registering for one does nothing to the other, and a company under £90,000 of sales can go its whole life paying Corporation Tax without ever being VAT registered.
Where does SimpleReturns fit in?
Straight answer: VAT returns are separate from the Company Tax Return we file, so if your company is VAT registered, you or your bookkeeper handle the VAT side separately. What we do is the yearly bit every company has whether VAT registered or not: your Company Tax Return to HMRC and your annual accounts to Companies House, worked out from your bank statement and a few plain English questions, for £99 covering both filings. It is free to start, so you can see your numbers before paying anything.