VAT Registration Threshold 2024: Should Sole Traders Register Early?

What Changed in April 2024?

From 1 April 2024, HMRC raised the VAT registration threshold from £85,000 to £90,000 in taxable turnover over any rolling 12-month period. This was the first increase since 2017 and gave hundreds of thousands of sole traders more time before they were legally required to register. The deregistration threshold also rose, from £83,000 to £88,000.

If your taxable turnover exceeds £90,000 in any 12-month rolling period, you must register within 30 days and begin charging VAT from the first day of the following month. Missing this deadline results in a penalty and backdated VAT liability — a costly mistake to avoid.

Why Voluntary Registration Might Make Sense

Even if you're earning well below £90,000, registering for VAT voluntarily can work in your favour depending on your business model. Here's when it makes sense:

• You work mainly with VAT-registered businesses. Your clients can reclaim the VAT you charge, so adding 20% to your invoices doesn't make you less competitive. You also get to reclaim VAT on your own business purchases.
• You have significant business expenses. If you buy equipment, software, or materials with VAT included, voluntary registration lets you reclaim that input tax — potentially saving you thousands each year.
• You want to appear more established. A VAT number can signal credibility and scale, particularly useful if you're pitching to larger corporate clients.

When Early Registration Could Hurt You

Voluntary registration isn't right for everyone. Consider the downsides carefully:

• You sell directly to consumers (B2C). Individual customers cannot reclaim VAT, so your prices effectively rise by 20% overnight, making you less competitive against non-VAT-registered rivals.
• You'll face additional admin burden. You must submit VAT returns (usually quarterly via Making Tax Digital-compatible software), keep detailed VAT records, and manage cash flow around payment deadlines.
• Flat Rate Scheme benefits have narrowed. The Flat Rate Scheme can still suit some sole traders, but check current sector rates on GOV.UK before assuming it will save you money.

Tracking Your Turnover: Don't Get Caught Out

The £90,000 threshold is based on a rolling 12-month period, not the tax year. This catches many sole traders off guard. You need to check your cumulative turnover at the end of every month against the previous 12 months — not just from April each year.

For example, if your turnover from June 2025 to May 2026 totals £91,000, you crossed the threshold in May 2026 and must notify HMRC by 30 June 2026, with VAT registration effective from 1 July 2026.

Use accounting software or a simple spreadsheet to track your rolling 12-month figure monthly. Don't rely on memory or annual accounts alone.

How to Register

VAT registration is done online through your HMRC Business Tax Account at GOV.UK. You'll need your National Insurance number, business turnover figures, and bank details. HMRC typically processes applications within 30 working days, though it can take longer during busy periods. You can request a VAT registration date in the past if you've already exceeded the threshold.

The Bottom Line

The 2024 threshold increase was welcome news for growing sole traders, but it doesn't change the fundamental decision: voluntary registration is a strategic choice, not just a compliance box to tick. If your clients are mostly VAT-registered businesses and you have meaningful expenses to reclaim, registering early could improve your cash flow and professional image. If you're consumer-facing with tight margins, hold off until you genuinely need to.

Not sure which camp you fall into? Use EasyTax's VAT registration calculator or speak to an accountant before making the call.