The VAT registration threshold for builders: when you must register

The registration threshold for taxable supplies is £90,000. It rose from £85,000 on 1 April 2024, stayed at £90,000 through 2025/26, and HMRC’s supplement to VAT Notice 700/1, updated in August 2026, gives £90,000 as the current figure. The deregistration threshold, below which a registered business can ask HMRC to cancel its registration, is £88,000.

The threshold is a test of turnover, not profit, and it has nothing to do with the tax year. A builder who turns over £95,000 and keeps £30,000 of it is over the line. One who turns over £85,000 is under it, however good the year was.

You must register when your taxable turnover in any rolling twelve months goes over £90,000, or when you expect it to go over £90,000 in the next 30 days alone.

The rolling twelve-month test

At the end of every month, add up your taxable turnover for the twelve months just ended. If the total is over £90,000, you must tell HMRC within 30 days of the end of that month, and you are registered from the first day of the second month after it. Go over at the end of June and the deadline is 30 July, with VAT due on your sales from 1 August.

Because the total rolls, the oldest month drops out each time a new one comes in. Checking once a year, at your accounts date, misses eleven of the twelve tests.

The 30-day look ahead

Separately, if at any time you expect your taxable turnover in the next 30 days alone to go over £90,000, you must register by the end of that 30-day period, and you are registered from the date you realised, not the date the money arrives. GOV.UK’s own example is a £100,000 contract agreed on 1 May and paid at the end of the month: apply by 30 May, registered from 1 May.

For a small builder this test usually bites on a single large job worth more than £90,000 on its own, all of it supplied inside a month. Where a big job is billed in stages over several months, it is the rolling test that catches it.

NoteThe 30-day test looks at one 30-day period on its own. It is not "you will probably go over at some point this year". That is the rolling test, and it is applied looking back at each month end.

Taxable turnover is the total value of everything you sell that is not exempt from VAT or outside its scope. For a builder that is almost everything you invoice.

• Standard-rated work at 20%. Most work on existing homes and commercial buildings: repairs, extensions, refurbishment and maintenance.
• Reduced-rated work at 5%. For example certain residential conversions and renovations of homes that have stood empty, where the conditions in VAT Notice 708 are met.
• Zero-rated work. Building a new house or flat, and certain work for disabled people in their own home. These sales count towards the threshold even though no VAT would be charged on them.
• Reverse charge sales. GOV.UK lists goods and services subject to the domestic reverse charge as part of taxable turnover. When you invoice a CIS contractor under the reverse charge, the customer accounts for the VAT, but the sale is still yours.
• Materials you supply. Turnover is the full price of the job, so the kitchen, the boiler and the timber you charge for count alongside your labour.
• Building work over £100,000 that your business did for itself. GOV.UK includes it. It arises, in certain circumstances, where a business uses its own labour to construct a building for its own use.

What does not count: exempt supplies, such as certain sales and lettings of land and buildings, and sales of your own capital assets, such as the old van or a piece of plant. HMRC’s notice says to leave capital assets out unless they are land or buildings sold under an option to tax.

Labour-only work under CIS counts at its gross value. The 20% a contractor deducts is an advance payment towards your tax, not a reduction in what you sold, and HMRC tells subcontractors to record pay before deductions as their income. A labour-only subcontractor invoicing £1,800 a week gross reaches £93,600 over a 52-week year.

A sole trader builder doing extensions and refurbishment for homeowners, all of it standard-rated, not yet registered for VAT. The test is run at each month end on the twelve months just finished.

At the end of June the rolling total is £91,500, over the threshold for the first time. The builder must tell HMRC by 30 July and is registered from 1 August. From that date VAT is due on every standard-rated sale, whether or not it has been added to the price.

July is the trap. A quiet month, with a busy one dropping out of the window, takes the total back to £89,500, and it is tempting to think the problem has gone away. It has not. The liability arose at the end of June, and dropping back under does not undo it.

Change one assumption and the answer stays the same: if the June work had been zero-rated labour on a new house, it would still count, and the builder would still be over.

Registering late

HMRC registers you from the date you should have been registered, whenever you tell it, and you owe VAT on your sales from that date even if you never charged any. Where no VAT was added, the price you charged is treated as including VAT, so on standard-rated work a sixth of what you were paid belongs to HMRC. A penalty may be charged on top, depending on how much is owed and how late the registration is.

Going over once

If a one-off job takes you over and your turnover will fall back, apply for exception from registration. HMRC has to be satisfied that taxable turnover in the next twelve months will not go over £88,000; if it refuses, it registers you from the date you were first liable.

While you wait for your number

You account for VAT from your registration date, but you cannot show VAT on an invoice until HMRC has given you a VAT number. You can raise your prices to cover it and tell VAT-registered customers that a VAT invoice will follow. Once the number arrives, send those customers their VAT invoices within 30 days.

NoteIf all or most of your work is zero-rated, typically a builder who only builds new houses, you can ask HMRC for exemption from registration. It is not automatic, and registering may suit you better, because a registered business reclaims the VAT on its materials.

You can register below £90,000 if you are in business, and you can choose your registration date, including backdating it by up to four years. Once registered you charge VAT on every standard-rated and reduced-rated sale, reclaim the VAT on your business costs, and file a return for every period, even one with nothing to pay.

When you register you can usually reclaim VAT on goods bought for the business up to four years before your registration date that you still have, and on services bought up to six months before it. Choose the date with care: once HMRC has agreed it, it cannot be changed.

The cost is administration. Registered businesses keep digital records and send VAT returns from software that works with Making Tax Digital, usually every three months, with the return and the payment due one calendar month and seven days after the period ends.

Mostly the price. A homeowner cannot reclaim VAT, so on standard-rated work the customer pays 20% more or you absorb it. On a £12,000 bathroom quoted with VAT included, £2,000 now goes to HMRC.

• Say on every quote whether VAT is included. "£10,000 excluding VAT" and "£10,000" are different prices to a homeowner. A quote accepted before you registered, for work you finish after, is the awkward case: whether you can add VAT depends on what the quote said. Put the VAT position in writing from the moment you are close to the threshold. See is a builder’s quote legally binding.
• Show the right rate on each line. Standard, reduced and zero-rated work can sit on one job, and each needs its own rate. Zero-rated items have to show clearly that no VAT is due, with a separate total.
• Put your VAT number on every invoice. HMRC says the nine-digit number must appear on all invoices you raise. The rest of what a VAT invoice needs is in what must a builder’s invoice include.
• Check every trade customer for the reverse charge. Most CIS work for a VAT and CIS registered contractor that has not told you it is an end user goes on the reverse charge, with no VAT added. See the VAT domestic reverse charge.

Two schemes change how you account for VAT, not what you charge.

The Flat Rate Scheme

You can join if you expect VAT taxable turnover of £150,000 or less, excluding VAT, in the next twelve months, and you must leave once it goes over £230,000 including VAT. You pay HMRC a fixed percentage of your VAT-inclusive turnover and keep the rest, but you cannot reclaim VAT on purchases other than certain capital assets over £2,000.

Reverse charge sales are left out of the flat rate calculation, and HMRC tells flat rate users who make them to consider whether the scheme is still useful, because the VAT on materials and overheads cannot be recovered inside it.

Cash accounting

Under the Cash Accounting Scheme you pay VAT on a sale when the customer pays you rather than when you invoice. It is open to businesses with taxable turnover of £1.35 million or less, cannot be combined with the Flat Rate Scheme, and cannot be used for reverse charge supplies. How the timing of VAT moves your bank balance is in cash flow for small builders.

NoteMaking Tax Digital for VAT applies to every VAT-registered business that is not exempt, and HMRC signs new registrations up to it. Making Tax Digital for Income Tax is a separate regime with its own thresholds that does not depend on VAT registration. See CIS, VAT and MTD in 2026.

Every Estimark invoice stores the net amount, the VAT rate and the VAT separately on the record, not only on the PDF, and invoices push to Xero, QuickBooks or Sage Business Cloud Accounting, where the VAT return is normally prepared. The rate comes from your company VAT setting. Flag a customer for the reverse charge and every invoice raised for them shows nil VAT, the rate the customer must account for and the section 55A wording; with no VAT number on your company record, the reverse charge stays switched off.

Estimark does not submit VAT returns and sends nothing to HMRC under Making Tax Digital, and it does not decide whether you should register. Invoices export as CSV from Reports, which gives you the figures for a month-end rolling total; have your accountant confirm the answer before you rely on it. More on the reverse charge in Estimark.

• Register for VAT (GOV.UK)
• How VAT works: VAT thresholds (GOV.UK)
• Who should register for VAT, VAT Notice 700/1 (HMRC)
• VAT Notice 700/1: supplement (HMRC)
• VAT for builders (GOV.UK)
• VAT Flat Rate Scheme (GOV.UK)
• VAT Cash Accounting Scheme (GOV.UK)
• VAT domestic reverse charge technical guide (HMRC)
• Sending a VAT Return (GOV.UK)
• Charge, reclaim and record VAT (GOV.UK)
• What you must do as a CIS subcontractor (GOV.UK)