CIS, VAT and MTD, 29 October 2026
VAT registration for trades: when you must register, and when it's worth it early
You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days alone. The 12 months roll forward every month, so check at every month end. Register within 30 days of the end of the month you went over. You can register earlier by choice.
Must you register for VAT now?
Do it within 30 days of the end of the month you went over. If it's a one-off spike, you can ask HMRC for an exception.
Register by the end of that 30-day period, for example when a single large contract will push turnover over £90,000 on its own.
VAT-registered customers can reclaim your VAT, so it doesn't raise their cost, and you can reclaim VAT on vans, tools and materials.
Keep checking your rolling total each month. Most homeowners can't reclaim VAT, so registering early would push your prices up or cut your margin.
Taxable turnover includes zero-rated sales, so a builder doing only zero-rated new-build work still counts it. It doesn't include exempt sales. Reverse-charged work counts as turnover too, even though no VAT is collected on it.
How does the rolling 12-month test work?
At the end of each month, add up your taxable turnover for that month and the 11 before it. If the total is over £90,000, you've crossed.
A heating engineer crossing the threshold in June 2026
Rolling 12-month totals, checked at each month end.
| 12 months to 30 April 2026 | £86,200 |
| 12 months to 31 May 2026 | £88,900 |
| 12 months to 30 June 2026over £90,000 | £91,500 |
| Deadline to register30 days after the end of June | 30 July 2026 |
| Effective date of registrationfirst day of the second month after crossing | 1 August 2026 |
The trap for trades is a quote accepted before registration and invoiced after. If you quoted a homeowner £12,000 in May and invoice in August, VAT is due on that invoice. Unless your terms said "plus VAT if applicable", the £2,000 VAT comes out of your margin (£12,000 ÷ 1.2 = £10,000 net).
What does registering do to your prices?
For VAT-registered customers, such as main contractors and commercial clients, very little: they reclaim it. Much of that work will be reverse charged anyway (see does the reverse charge apply). For homeowners, it's a real 20% on most work.
| A £5,000 bathroom refit for a homeowner | Before registering | Registered, VAT on top | Registered, price held |
|---|---|---|---|
| Price to the customer | £5,000 | £6,000 | £5,000 |
| VAT paid to HMRC | £0 | £1,000 | £833 |
| You keep (before reclaiming VAT on costs) | £5,000 | £5,000 | £4,167 |
Holding the price means the VAT comes out of your takings: £5,000 ÷ 1.2 = £4,167, so £833 goes to HMRC. You'll get some back by reclaiming the VAT on materials and other costs, which narrows the gap.
I'm having a full-blown conversation with eight people all at once.
For example, a one-person firm taking up to 20 enquiries a day, most on WhatsApp, can grow fast enough that the rolling total moves months ahead of the paperwork. That's the situation where the threshold gets crossed without anyone checking.
When is registering early worth it?
Early registration suits you when most of your customers are VAT-registered, because they reclaim your VAT and your prices stay competitive, while you reclaim VAT on vans, tools and materials. It's also worth looking at if you're about to buy a van or kit and turnover is close to the line.
After registering, you can reclaim VAT on goods you bought in the 4 years before registration if you still have them, and on services from the 6 months before. Keep the invoices.
What changes once you're registered?
You put your VAT number on invoices and show VAT separately, file VAT returns (usually quarterly) through MTD-compatible software, and pay what you owe. You may be able to use the Cash Accounting Scheme if taxable turnover is £1.35 million or less, paying VAT when customers pay you, though not on reverse charge work. The Flat Rate Scheme is open to businesses with VAT turnover of £150,000 or less; check its rates on GOV.UK against your materials spend before joining.
This page sets out HMRC's rules. Whether early registration pays for your mix of customers is a question for your accountant, with your real figures.
Where Nexley fits
Nexley is the AI back office for UK trade firms: five AI assistants run your tenders, quotes, buying, scheduling and invoicing. It connects to the tools you already work in, you run it all from WhatsApp, and you approve everything. £799 a month.
For VAT, Nexley keeps your invoices up to date as you go, so the rolling 12-month figure is there when you ask for it over WhatsApp. Once you're registered, it drafts invoices with the right VAT treatment for each customer and you approve them.
Common questions
Is the VAT threshold based on profit or turnover?
Turnover. It's the total value of everything you sell that isn't exempt, before expenses. A firm with £95,000 of sales and £30,000 profit must register.
Does the threshold work on the tax year?
No. It's any rolling 12-month period, checked at each month end. Plus a forward look: if you expect to go over £90,000 in the next 30 days alone, you must register straight away.
Does reverse-charged or zero-rated work count?
Yes. Both count towards taxable turnover. Only exempt sales are left out.
What if I crossed it by accident months ago?
Register as soon as you can. VAT is due from the date you should have been registered, and you might face a penalty depending on how much and how late. Talk to an accountant before you contact HMRC.
Sources
- GOV.UK: Register for VAT
- GOV.UK: How VAT works, VAT thresholds
- GOV.UK: Check what registering for VAT may mean for your business
- GOV.UK: Reclaim VAT on business expenses
- GOV.UK: Charge, reclaim and record VAT
- GOV.UK: VAT Cash Accounting Scheme
- GOV.UK: VAT Flat Rate Scheme
Every rule, rate and date above was checked against these sources on the date shown at the top.
Topic: CIS, VAT and MTD
Keep reading
CIS, VAT and MTD
CIS for subcontractors and contractors: how it works
CIS decides how much of every subcontract invoice reaches the bank and how much goes to HMRC. Here's how it works from both sides, with a worked invoice and a calculator for your own figures.
CIS, VAT and MTD
VAT domestic reverse charge: does it apply to my invoice?
Five questions decide whether your invoice charges VAT or says "reverse charge". Run the quick check, then see four real-shaped trade invoices worked through and the wording to put on yours.
CIS, VAT and MTD
VAT on domestic vs commercial building work: which rate and when
Whether the client is a homeowner or a business doesn't decide the VAT rate. The type of work does. Run the quick check, then see a worked loft-and-solar quote split across two rates.
