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Income Tax: Personal allowance frozen at £12,570 CGT: Annual exempt amount is £3,000 NICs: Main Class 1 Employee NI rate reduced VAT: MTD system requirements fully enforced SDLT: First-time buyer relief threshold £425,000 Corporation Tax: Main rate 25% for profits over £250k IHT: Nil-rate band frozen at £325,000 Pension: Annual allowance set at £60,000
VAT 2026/27: Registration, Rates, Schemes & MTD Explained
Business Tax · 2026/27

VAT
explained.

Value Added Tax is charged on most goods and services. Here is the 2026/27 registration threshold, the rates, the schemes that can save you time and money, how returns and Making Tax Digital work, and the deadlines that matter.

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✓ Verified 2026/27✓ HMRC sources✓ Free calculators

VAT

🧾 2026/27
Standard rate20%
Register at£90,000
Deregister at£88,000
Reduced rate5%
Verified figuresUpdated May 2026
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Key 2026/27 figures

The numbers that matter.

20%
Standard rate
£90,000
Registration threshold
£88,000
Deregistration threshold
£150,000
Flat Rate Scheme join limit
Complete guide

VAT for 2026/27

When you must register, the rates, the schemes, how to file returns under Making Tax Digital, and the deadlines and penalties.

When you must register

You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect to exceed £90,000 in the next 30 days alone. The threshold has been frozen since April 2024 and is measured monthly — it does not reset at the start of the tax year. The deregistration threshold is £88,000. You can also register voluntarily below the threshold, which can be worthwhile if you sell to other VAT-registered businesses or want to reclaim VAT on costs.

⚠️ The 30-day forward look

If you realise a single large order will take you over £90,000 in the next 30 days, you must register immediately — you cannot wait for the rolling test. Missing the deadline can mean backdated VAT and penalties.

The rates

RateApplies to
20% standardMost goods and services
5% reducedDomestic fuel and power, children's car seats, some energy-saving materials
0% zero-ratedMost food, children's clothing, books, public transport
ExemptInsurance, finance, postage, some property and education

Zero-rated sales still count towards your turnover and let you reclaim input VAT; exempt sales do not. Getting the distinction right matters.

How a VAT return works

You charge VAT on your sales (output tax) and reclaim VAT on your business purchases (input tax). You pay HMRC the difference — or claim a refund if input tax is higher.

Worked example

Standard-rated business, one quarter

Output VAT on £75,000 sales (20%)£15,000
Input VAT on £20,000 purchases (20%)− £4,000
VAT payable to HMRC£11,000

Use our VAT calculator to add or remove VAT from a figure quickly.

The schemes

  • Flat Rate Scheme — pay a fixed percentage of gross turnover instead of tracking input VAT. You can join with turnover under £150,000 and must leave above £230,000 (VAT-inclusive). Many service businesses are "limited cost traders" and must use the 16.5% rate, so check the numbers first.
  • Cash Accounting — account for VAT when you are paid, not when you invoice; helpful for cash flow. Available with turnover up to £1.35 million.
  • Annual Accounting — one return a year with interim payments. Available with turnover up to £1.35 million.

Making Tax Digital and returns

All VAT-registered businesses must keep digital records and file returns using MTD-compatible software. VAT returns are usually quarterly, and the return and payment are due one calendar month and seven days after the end of the VAT period (so a quarter ending 30 June is due by 7 August).

💡 Late returns and payments

VAT now uses a points-based late-submission penalty system plus late-payment penalties and interest. File and pay on time even in a difficult month to avoid points and charges.

🔗 Official sources

gov.uk VAT registration · VAT rates · VAT returns · Making Tax Digital for VAT.

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Common questions

VAT FAQs

Registration, rates, schemes, returns and deadlines — answered for 2026/27.

What is the VAT registration threshold for 2026/27?
£90,000 of taxable turnover, measured on a rolling 12-month basis. It has been frozen since April 2024.
What is the VAT deregistration threshold?
£88,000. If your taxable turnover falls below this, you can apply to cancel your registration.
What is the standard rate of VAT?
20%. A reduced 5% rate and a 0% zero rate apply to specific goods and services.
When must I register within 30 days?
If you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register straight away rather than waiting for the rolling test.
Can I register for VAT voluntarily?
Yes. Voluntary registration lets you reclaim input VAT and can look more established to business customers, though you must then charge VAT and file returns.
What is the difference between zero-rated and exempt?
Zero-rated sales are taxable at 0% and let you reclaim input VAT; exempt sales are outside VAT and do not allow input VAT recovery.
How is a VAT return calculated?
Output VAT charged on sales minus input VAT on purchases. You pay the difference to HMRC, or reclaim if input VAT is higher.
How often do I file VAT returns?
Usually quarterly. The return and payment are due one calendar month and seven days after the end of the VAT period.
What is Making Tax Digital for VAT?
The rule that all VAT-registered businesses keep digital records and file returns using MTD-compatible software.
What is the Flat Rate Scheme?
A scheme where you pay a fixed percentage of gross turnover as VAT instead of tracking input tax. You can join under £150,000 turnover and leave above £230,000.
What is a limited cost trader?
A flat-rate business that spends little on goods. It must use the 16.5% flat rate, which often makes the scheme less attractive — check before joining.
What is Cash Accounting for VAT?
A scheme where you account for VAT when you are paid rather than when you invoice. Available with turnover up to £1.35 million; good for cash flow.
What is Annual Accounting?
One VAT return a year with interim payments, available with turnover up to £1.35 million. It reduces admin but not the tax due.
Do zero-rated sales count towards the threshold?
Yes. All taxable supplies, including zero-rated and reduced-rated sales, count towards the £90,000 threshold.
Can I reclaim VAT on past purchases after registering?
Often yes — generally on goods bought up to four years before registration and still held, and services within six months, subject to conditions.
What VAT penalties apply?
A points-based system for late returns, plus late-payment penalties and interest. Points convert to a fixed penalty once a threshold is reached.
Is there a VAT domestic reverse charge in construction?
Yes. For many construction services between VAT-registered businesses, the customer accounts for the VAT. See the CIS guide for how it interacts with the scheme.
Do I charge VAT to overseas customers?
It depends on the place of supply and whether they are a business or consumer. Rules differ for goods and services and post-Brexit trade; take advice for cross-border sales.
How do I pay my VAT bill?
Electronically by Direct Debit, Faster Payments, Bacs or card, using your VAT registration number as reference, by the due date.
Where can I find official VAT guidance?
See gov.uk VAT registration, VAT rates and Making Tax Digital for VAT, linked in the guide above.
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UK Tax Hero provides general tax guidance and a free expert-matching service for the 2026/27 tax year. It is not personal tax, legal or financial advice. Figures are based on published HMRC rates and may change. Always confirm details on GOV.UK or with a qualified professional before acting.