VAT threshold calculator
Crossing the VAT threshold may cost you nothing at all.
Freelancers turn down work to stay under £90,000, often for no reason. Whether registration costs you anything depends almost entirely on one thing: whether your clients can reclaim the VAT you charge them.
Your position
Everything you invoice, on a rolling twelve month view rather than a tax year. This is the figure HMRC watches.
Used to work out how many billable days it takes to reach the threshold.
Room before you must register
Headroom left
£18,000
the threshold is £90,000
- Turnover
- £72,000
- Threshold
- £90,000
- VAT you would charge
- £14,400
- What registering costs you
- £0
Your clients reclaim the VAT you charge them, so registering costs you nothing beyond the paperwork. You also start reclaiming VAT on your own purchases, which usually leaves you slightly ahead.
2026/27 thresholds. Registration is compulsory once rolling twelve month turnover passes £90,000, and you may apply to deregister below £88,000.
How the threshold works
It is a rolling test. Registration becomes compulsory when your taxable turnover across any rolling twelve months passes £90,000, not when a tax year ends. You must also register if you expect to pass it within the next 30 days alone. Checking once a year is how people register late.
Who your clients are decides everything. A VAT-registered business reclaims what you charge, so your invoice rising by 20% costs them nothing and costs you nothing. A consumer cannot reclaim, so you either become 20% more expensive or absorb it.
Absorbing is one sixth, not one fifth. If you keep your price the same, it becomes VAT-inclusive. The VAT is one sixth of the total, so £120,000 of invoices leaves you £100,000. That is a 16.7% cut, not 20%.
Registering has an upside. Once registered you reclaim VAT on your own costs: equipment, software, an accountant, professional subscriptions. For someone billing business clients this usually leaves them slightly better off than before.