The VAT registration threshold is the level of VAT-taxable turnover at which a business must register for VAT. It is £90,000 and has been frozen since 1 April 2024. Registration becomes compulsory once turnover exceeds £90,000 in any rolling 12-month period, or where it is expected to exceed that figure in the next 30 days.
Most contractor services are standard-rated at 20%. Many contractors register voluntarily below the threshold, because they can then reclaim the VAT on their own business costs, and because their end clients are usually VAT-registered themselves and can recover the VAT charged, so charging VAT costs the client nothing in net terms.
The deregistration threshold is £88,000: a business can apply to deregister if its taxable turnover falls below that figure. A contractor weighing up registration should also consider the Flat Rate Scheme, though for most labour-only contractors the limited cost trader 16.5% rate makes standard VAT accounting the better choice. The statutory hook is VATA 1994 Schedule 1.