What Is the VAT Threshold in 2026/27?
You must register for VAT if your taxable turnover for the last 12 months has gone over £90,000, or if you expect it to go over £90,000 in the next 30 days alone (VATA 1994 Sch 1 para 1(1)). There is no separate threshold for landlords or small businesses.
The 12-month test is rolling. You check it at the end of every month, looking back 12 months from that date. The tax year does not matter: a busy summer can take your 12-month total over £90,000 in August, even if your total from April to April stays below it.
From | Registration threshold | Deregistration threshold |
|---|---|---|
1 April 2017 | £85,000 | £83,000 |
1 April 2024 | £90,000 | £88,000 |
April 2026 (2026/27) | £90,000 | £88,000 |
April 2027 (2027/28) | £90,000* | £88,000* |
*Confirmed in the Budget 2026 rates and allowances annex, published 05/11/2026.
If you are registered and your taxable turnover falls below £88,000, you can ask HMRC to cancel your registration (GOV.UK: Register for VAT). The gap between the two figures stops businesses trading close to the line from registering and cancelling every few months.
Does Rental Income Count Towards the VAT Threshold?
Not if it is rent from a residential tenancy. Letting land and buildings is normally exempt from VAT, and exempt income is left out of taxable turnover altogether. So a landlord whose only income is residential rent has a taxable turnover of nil, however much rent they receive.
Taxable turnover is everything you sell that is not exempt or outside the scope of VAT. It includes zero-rated and reduced-rated sales as well as standard-rated ones. So the question for a landlord is not how much rent you receive, but which parts of it are taxable.
Which Property Income Counts?
Type of income | VAT treatment | Counts towards £90,000? |
|---|---|---|
Rent from an assured shorthold or other residential tenancy | Exempt | No |
Garage or parking space let to the same tenant with their home | Exempt, as part of the letting | No |
Garage or parking space let on its own, for example to a neighbour | Standard-rated, 20% | Yes |
Holiday lets and short-stay serviced accommodation | Standard-rated, 20% | Yes |
Commercial rent, no option to tax | Exempt | No |
Commercial rent, opted to tax | Standard-rated, 20% | Yes |
Residential service charges required under the lease | Exempt, follows the rent | No |
Optional services sold to tenants, such as cleaning | Standard-rated, 20% | Yes |
Gas or electricity charged through a secondary credit meter | Reduce-rated, 5% | Yes |
Source: VAT Notice 742, paragraphs 3.1, 4.2, 4.4.4, 12.1 and 12.3.
Can I Register Voluntarily to Reclaim VAT on Repairs?
Not if all your income is exempt. HMRC will not register a business whose supplies are all exempt (VAT Notice 700/1, para 2.6). A residential landlord cannot register just to recover VAT on a refurbishment.
If you do make some taxable supplies, such as holiday-let bookings, you can register voluntarily below the threshold. You would then charge VAT on those supplies. VAT on costs linked to your exempt residential lettings would still be largely irrecoverable under the partial exemption rules.
When you register, you can usually reclaim VAT on two kinds of earlier purchase that relate to your taxable business: goods bought in the previous four years that you still hold, and services bought in the previous six months. Holiday guests cannot reclaim the VAT you charge them, so weigh that recovery against the 20% you would add to your prices.
How Do Landlords Calculate Taxable Turnover?
At the end of each month, add up the value of your taxable supplies for the previous 12 months. For a landlord, that means three steps:
List every source of income from the last 12 months.
Remove anything exempt, such as residential rent and unopted commercial rent.
Remove sales of capital assets, such as a building or a van, unless the sale was of land you had opted to tax and was not zero-rated (VATA 1994 Sch 1 para 1(7) and (8)).
What is left is your taxable turnover. Use the full amount guests and tenants pay, not the net payout after agent or platform fees. If a booking platform contracts with guests in its own name rather than as your agent, the value of your supply may be different, so check your booking terms.
EXAMPLE
Daniel owns four buy-to-let flats producing £72,000 a year in residential rent. He also has a holiday cottage taking £58,000 in bookings, and lets three garages to local residents for £3,600. His taxable turnover is £58,000 + £3,600 = £61,600. The £72,000 of residential rent is exempt and ignored, so he is under the VAT threshold. If his cottage bookings rose to £87,000 over 12 months, his taxable turnover would reach £90,600 and he would have to register.
Does My Self-Employment Income Count Too?
Yes. VAT registers the person, not the business, so a sole trader must count every business activity they carry on. Taxable sales from your trade and taxable lettings in your own name are added together. Exempt residential rent is still ignored.
For example, £60,000 of standard-rated consultancy fees plus £35,000 of holiday-let bookings is £95,000 of taxable turnover. That is over the threshold, even though neither activity reaches £90,000 alone. Once registered, you charge VAT on both, because one registration covers all your taxable supplies.
Do Joint Owners Each Get £90,000?
Not in the way most people expect. HMRC treats joint owners as a single person making a single supply. If their taxable lettings go over the threshold, they register as a partnership, even if no legal partnership exists.
For VAT, an individual trading alone is a different person from the same individual trading in partnership. So a holiday let you own with your spouse is tested separately from a holiday let you own alone. However, if a business has been artificially split between owners to stay under the threshold, HMRC can treat it as a single business.
A couple jointly owning a holiday let taking £100,000 a year must register for VAT as a partnership. For MTD, each of them is tested on their own £50,000 share.
When Must You Register, and From What Date?
You have 30 days to tell HMRC, and your registration usually starts from the first day of the second month after you went over. The deadline and start date depend on which test you meet.
Test you meet | Deadline to tell HMRC | Effective date of registration |
|---|---|---|
Taxable turnover in the last 12 months went over £90,000 | Within 30 days of the end of the month you went over | First day of the second month after you went over |
You expect taxable turnover in the next 30 days alone to go over £90,000 | By the end of that 30-day period | The date you realised you would go over |
Source: VAT Notice 700/1, paras 4.2 to 4.4.
If your rolling total goes over £90,000 at the end of March, you must apply by 30 April. Your registration takes effect on 1 May.
Exception from registration
If you go over the threshold only temporarily, you can ask HMRC not to register you. You must show that your taxable turnover in the next 12 months will not go over £88,000. This is called an exception, and you apply on paper using form VAT1. It is different from an exemption from registration, which is only for businesses whose sales are mostly zero-rated.
Late registration
HMRC registers you from the date you should have been registered, whenever you tell it. You must account for VAT from that date even if you did not charge it to guests or tenants. You may also face a penalty under Finance Act 2008 Sch 41.
Put a month-end reminder in your diary to total your taxable lettings for the last 12 months. Checking only once a year, when you do your tax return, is a common way to register late.
Holiday Lets, Garages and Other VATable Lettings
Holiday accommodation is standard-rated, so every booking counts towards the VAT threshold.
The furnished holiday lettings regime was abolished for Income Tax from 6 April 2025. That did not change VAT: HMRC has confirmed that holiday accommodation is still standard-rated, whether or not it qualified as a furnished holiday let (GOV.UK policy paper). HMRC's Notice 709/3 on hotels and holiday accommodation explains when a let counts as holiday accommodation, including properties let both to holidaymakers and on longer-term tenancies.
Garages and parking spaces follow the split shown in the table under 'Which Property Income Counts?'. Parking supplied with holiday accommodation is normally standard-rated too.
EXAMPLE
Aisha lets a holiday cottage in Cornwall. This is how her rolling 12-month total moves at the end of August 2026:
Step | Amount |
|---|---|
Bookings for the 12 months to 31 July 2026 | £86,400 |
Add: August 2026 bookings | + £9,800 |
Less: August 2025 bookings, now outside the 12-month window | − £5,100 |
Rolling total at 31 August 2026 | £91,100 |
VAT registration threshold | £90,000 |
She went over the threshold in August, so:
What happens | Date |
|---|---|
Deadline to tell HMRC | 30 September 2026 |
Registration takes effect | 1 October 2026 |
If she keeps her prices the same, £1 in every £6 she takes from then on goes to HMRC as VAT.
If Aisha could show that the August spike was a one-off and her next 12 months would stay at or below £88,000, she could apply for an exception instead.
Commercial Property and the Option to Tax
Commercial rent is exempt and does not count towards the VAT threshold, unless you opt to tax the building. Once you opt, the rent becomes standard-rated and counts in full.
Landlords usually opt to tax so they can reclaim VAT on buying or refurbishing a commercial building. Opting is a two-stage process: you decide, then you notify HMRC in writing, normally within 30 days of that decision. An option to tax generally has no effect on dwellings.
An option is hard to undo. You can only revoke it within a six-month cooling-off period (form VAT1614C) or after it has been in place for a set period, subject to conditions in VAT Notice 742A.
Selling a building does not normally count towards the VAT threshold, because sales of capital assets are left out. Opted land is the exception: a taxable sale that is not zero-rated counts in full. An unregistered landlord who has opted to tax a shop and then sells it for £450,000 goes over £90,000 with that one sale. Selling a let building as a transfer of a going concern is not a supply at all, so check the transfer of a going concern conditions before exchange.
If you deregister while you still own opted property, you may have to account for VAT on it as if you had sold it. This applies where you could reclaim VAT when you bought or built it, and the total VAT due on your assets would be over £1,000.
Non-Resident Landlords and the VAT Threshold
If you have no business establishment in the UK, the £90,000 threshold does not apply to you. HMRC calls you a non-established taxable person. You must register as soon as you make any taxable supply in the UK, or expect to make one within the next 30 days. You must tell HMRC within 30 days.
Whether the threshold applies depends on where your business is established, not on your tax residence. You are UK-established if you have a business or other fixed establishment in the UK. A registered, serviced or virtual office on its own is not enough.
What this means in practice
Residential lets only: your rent is exempt, so you make no taxable supplies and cannot register.
A UK holiday let: the first booking is a taxable supply, so you must register from the start.
Opted commercial property: the first rent payment after opting is a taxable supply, so you must register.
An owner with no UK establishment whose UK holiday cottage takes £20,000 a year must register for VAT and charge it on every booking. A UK-resident owner of the same cottage would be well under the threshold. You can appoint a UK VAT agent or tax representative to handle returns for you.
VAT is separate from the Non-Resident Landlord Scheme, which deals with Income Tax on UK rent. Being in one does not affect the other.
VAT Threshold vs MTD for Income Tax Threshold
The VAT threshold and the MTD threshold are separate tests that measure different income, so being inside one tells you nothing about the other. The biggest difference for landlords is residential rent: it is ignored for VAT but counts in full for Making Tax Digital.
Basis | VAT registration | MTD for Income Tax |
|---|---|---|
Threshold | £90,000 of taxable turnover | Over £50,000 of qualifying income (2024/25 figures, from 6 April 2026); over £30,000 from 6 April 2027; over £20,000 planned from 6 April 2028 |
Period tested | Any rolling 12 months, checked monthly, plus a 30-day forward test | An earlier tax year's Self Assessment figures |
Residential rent | Ignored, because it is exempt | Counts in full, gross |
Holiday lets and opted commercial rent | Count | Count |
Self-employment | Taxable sales count | Gross turnover counts |
Jointly owned property | Joint owners are one person (a partnership) | Each owner counts only their own share |
Who it covers | Individuals, partnerships and companies | Individuals: sole traders and landlords |
Take Daniel from the example above. His taxable turnover is £61,600, so he does not need to register for VAT. If those were his 2024/25 figures, his qualifying income for MTD would be £133,600: his residential rent, holiday bookings and garage rent combined. He would have had to join Making Tax Digital for Income Tax from 6 April 2026.
You may see £90,000 in Making Tax Digital guidance too. Landlords whose UK property income is under £90,000 can report one total for income and one for expenses in their quarterly updates. That is an MTD reporting simplification, not the VAT threshold, and staying under it does not mean you are outside VAT.
See our guide to MTD for landlords using a letting agent.
Conclusion
For most landlords, the VAT threshold is less of a concern than it first appears. Rent from residential tenancies is exempt, so it never counts towards the £90,000 limit, however large your portfolio. The risk lies in the income that is taxable: holiday lets, garages and parking let on their own, commercial property you have opted to tax, and any sole trade you run alongside your lettings. Add those up at the end of every month, look back 12 months, and tell HMRC within 30 days of the end of that month if the total goes over £90,000. Joint owners and non-resident landlords should check their position separately, because the rules treat them differently. Finally, staying under the VAT threshold tells you nothing about Making Tax Digital for Income Tax, which counts your residential rent in full.
FAQ Section
This article gives general information about UK VAT and Making Tax Digital rules as at the date shown. It is not tax advice and does not cover every situation.
