Limited companies
VAT Threshold For Limited Companies
A plain-English guide for company directors on how the £90,000 VAT threshold applies to limited companies.
Quick Answer
Limited companies use the same UK VAT threshold as sole traders. The key test is rolling 12-month taxable turnover, not company profit. If a company's figures go over the current threshold of £90,000, the directors should review VAT registration with an accountant, tax adviser, or HMRC.
Key takeaways
- The VAT threshold is not higher just because the business is a limited company.
- Directors should monitor sales before year-end accounts are prepared.
- Profit after expenses is not the VAT threshold test.
- Invatax can help directors spot threshold risk earlier.
When should a limited company review VAT registration?
Many company directors assume VAT registration rules are different for limited companies and sole traders.
In reality, limited companies are also subject to the UK VAT registration threshold.
If a company's taxable turnover exceeds the threshold, VAT registration may need to be reviewed. Understanding when this can happen helps directors avoid rushed decisions and prepare for HMRC requirements.
What is the VAT threshold for a limited company?
As of 2026, the UK VAT registration threshold is £90,000.
This threshold applies to taxable turnover generated over a rolling 12-month period.
It is not based on:
- corporation tax periods
- financial statements
- accounting year-end dates
- profit
This is where many directors become confused. A company can approach the VAT threshold before the annual accounts are prepared.
Turnover vs profit
The VAT threshold is based on turnover, not profit.
For example:
| Turnover | Expenses | Profit |
|---|---|---|
| £120,000 | £105,000 | £15,000 |
Although profits are relatively low, turnover exceeds £90,000. VAT registration may therefore need to be reviewed.
Example limited company
Imagine a marketing agency operating through a limited company.
| Month | Sales |
|---|---|
| Jan | £6,000 |
| Feb | £6,500 |
| Mar | £7,000 |
| Apr | £7,500 |
| May | £8,000 |
| Jun | £8,000 |
| Jul | £8,500 |
| Aug | £8,500 |
| Sep | £9,000 |
| Oct | £9,000 |
| Nov | £10,000 |
| Dec | £10,500 |
Total turnover: £98,500.
Based on those figures, the company appears to have exceeded the VAT threshold and should review its registration position with an accountant or HMRC.
Benefits of planning ahead
Monitoring taxable turnover before VAT registration may need review allows directors to:
- review pricing strategies
- forecast cash flow
- assess profit margins
- prepare customers for possible VAT charges
- make sure accounting systems are ready
- speak to an accountant before the deadline feels stressful
Common director mistakes
Focusing on year-end accounts
VAT registration can become relevant long before the company's year-end accounts are prepared.
Assuming the accountant will automatically identify it
Accountants can help, but directors should still monitor turnover continuously, especially during periods of growth.
Looking at profit instead of sales
The VAT threshold is based on taxable turnover, not profit.
Ignoring growth trends
A few strong months or a large contract can dramatically change the company's VAT position.
How Invatax helps limited companies
Invatax helps limited companies monitor taxable turnover, track their rolling VAT position, and receive prompts before VAT registration may need review.
It can also help prepare accountant conversations by showing rolling turnover, threshold room, warning level, and months included in the calculation.
Invatax is guidance software only. It does not make final VAT registration decisions and does not replace advice from an accountant, tax adviser, or HMRC.
Realistic UK example
A small consultancy company has £105,000 of taxable sales but only £22,000 profit after wages and costs. VAT threshold monitoring still starts with sales, not profit, so the directors may need to review registration.
Quick comparison
| Measure | Example amount | VAT threshold relevance |
|---|---|---|
| Taxable sales | £105,000 | Usually relevant |
| Expenses | £83,000 | Not deducted for threshold |
| Profit | £22,000 | Not the threshold test |
Related reading
Frequently asked questions
Is the VAT threshold different for limited companies?
No. The standard UK VAT registration threshold generally applies.
Is VAT registration based on profit?
No. It is based on taxable turnover.
Can a limited company register voluntarily?
Yes. Some companies register voluntarily, but this should be considered carefully.
Does VAT registration mean the business is more successful?
Not necessarily. Many growing businesses eventually become VAT registered, but VAT registration can affect pricing, cash flow, admin, and customer communications.
What should directors do if turnover is close to £90,000?
Review the rolling 12-month taxable turnover, check the treatment of any unusual income, and speak with an accountant or HMRC before acting.
Summary
For the central guide, read What is the VAT threshold?. Limited companies should not wait for year-end accounts to check VAT threshold risk. A rolling monthly view helps directors see whether VAT registration may need attention sooner.
Important note
Invatax is software only. It does not provide tax, legal, accounting, or regulated tax advice. VAT threshold monitoring is based on taxable turnover, not profit. Exempt income, outside-the-scope income, overseas sales, reverse charge, grants, loans, and unusual income may need separate VAT review. Review your position with an accountant, tax adviser, or HMRC before acting.