VAT for sole traders and micro-businesses: thresholds explained

Why the threshold matters more than it looks

Below the threshold, a sole trader in the UK or France charges no VAT. Your price is your income. You also can’t reclaim the VAT you pay on purchases: it’s simply part of your costs.

Once you’re registered, three things change at the same time:

1. Your price. You add VAT (20% standard rate in both the UK and mainland France) on top, or you absorb it and your income drops.
2. Your paperwork. VAT invoices need extra details, such as your VAT number and the VAT per rate. Our invoice requirements guide lists them for the UK and the EU.
3. Your cash. Part of every payment you receive belongs to the tax authority until your next return.

That’s why the useful skill isn’t knowing the number £90,000. It’s seeing it coming months ahead.

United Kingdom: the rolling 12-month test

The UK threshold isn’t measured over the tax year. It’s measured over any rolling 12 months, so the check is monthly: at the end of each month, add up the last 12 months of taxable turnover.

GOV.UK sets two triggers:

• Looking back: your taxable turnover for the last 12 months went over £90,000. You must register within 30 days of the end of the month you went over, and your registration takes effect from the first day of the second month after you went over.
• Looking forward: you expect your taxable turnover to go over £90,000 in the next 30 days alone, for example because a single large contract is about to be invoiced. Your registration then takes effect from the date you realised it would happen.

Taxable turnover includes zero-rated sales as well as standard-rated ones, so a business selling mainly zero-rated items can still cross the line. If you only went over temporarily, you can ask HMRC for an exception. Late registration can bring a penalty that depends on how much VAT is owed and how late you are.

Worked example: Priya, a freelance copywriter in Bristol, tracks her last 12 months at each month-end.

For how this looks on a UK sole trader’s invoice, see our guide to invoicing as a sole trader.

France: the franchise and its thresholds

France exempts small businesses from VAT under the franchise en base de TVA. For 2026 the thresholds are unchanged from 2025:

Two tests apply. Go over the standard threshold (measured on the previous calendar year) and you charge VAT from 1 January of the next year. Go over the higher threshold during the year and the exemption ends on the day you cross it. In the first year of trading, turnover is scaled up to a full year before comparing.

You may have read about a single €25,000 threshold. It was voted in France’s 2025 budget, suspended, and then repealed by a law of 3 November 2025. A single €37,500 threshold proposed for 2026 was rejected by Parliament. Our French guide to the TVA for auto-entrepreneurs covers the declarations that follow.

Registering voluntarily: when it makes sense

In the UK you can register even if your turnover is below £90,000. France has a similar option, which commits you for two calendar years.

It tends to make sense when:

• Your customers are VAT-registered businesses. They reclaim the VAT you charge, so a £1,000 + VAT invoice costs them the same as before in real terms.
• You have large purchases ahead. Equipment, vehicles or stock bought after registration carry VAT you can reclaim.
• You want to look established. Some larger clients expect a VAT number. That’s a perception, not a rule.

It rarely makes sense when most of your customers are consumers. They can’t reclaim anything, so either your price rises by 20% or your income falls by a sixth.

The UK Flat Rate Scheme

Once registered, a small UK business with VAT turnover of £150,000 or less (excluding VAT) can join the Flat Rate Scheme. You still charge 20% VAT, but you pay HMRC a fixed percentage of your VAT-inclusive turnover, set by trade, and you generally can’t reclaim VAT on purchases (except some capital assets over £2,000).

Example: Leon, a freelance event host, registered voluntarily. His trade isn’t in HMRC’s list, so he uses the rate for “any other activity not listed elsewhere”: 12%. On £60,000 of net sales he charges £12,000 VAT, so his VAT-inclusive turnover is £72,000.

• Flat rate: £72,000 × 12% = £8,640 paid to HMRC. He keeps £3,360 of the VAT he charged.
• First year as a VAT-registered business, with the 1% discount: £72,000 × 11% = £7,920.
• If he counts as a limited cost business (goods costing less than 2% of turnover, or less than £1,000 a year), the rate is 16.5%: £72,000 × 16.5% = £11,880, close to the £12,000 he charged.

Service businesses with few purchases often fall into the limited cost category. Check the test before assuming the scheme saves money.

Selling across borders: France for UK and other non-EU sellers

Since 1 January 2025, an EU small business can use the VAT exemption in other EU countries too, if its turnover across the whole EU stays under €100,000 and it notifies its own tax authority first. That scheme is not open to businesses established outside the EU, including the UK.

What that means for a UK freelancer with French customers:

• Services to French businesses are usually invoiced without French VAT: the French client accounts for it under the reverse charge. Our guide to invoicing a French client explains the wording.
• Sales to French consumers, or goods held in France, follow different rules and can require French VAT registration from the first euro. Get advice before you start.

The reverse also applies: a business based outside the UK that supplies goods or services in the UK must register for UK VAT whatever its turnover.

Seeing the threshold coming

No app will register you or tell HMRC anything, but you can make the monthly check take a minute. In Binome360, every payment you receive is logged in one sentence, with its date.

Once you’re registered, set the tax rate in your invoice settings and your invoices show the net amount, VAT and total. Binome360 is not a Making Tax Digital VAT filing tool: you file your returns through HMRC-recognised software.

Frequently asked questions

What is the VAT threshold for sole traders in 2026?

In the UK it’s £90,000 of taxable turnover in any rolling 12-month period. In France it’s €37,500 for services and €85,000 for goods, with higher tolerance thresholds of €41,250 and €93,500.

Do I have to register for VAT if I earn under £90,000?

No, unless you expect to go over £90,000 in the next 30 days alone, or you’re based outside the UK and supply goods or services in the UK. You can still choose to register voluntarily.

Can I deregister from VAT?

In the UK, you can ask HMRC to cancel your registration if your taxable turnover falls below £88,000. You must cancel within 30 days if you stop being eligible, for example because you stop trading.

Is the French VAT threshold now €25,000?

No. That change was voted for 2025 but suspended, then repealed in November 2025. In 2026 the thresholds are €37,500 for services and €85,000 for goods.

In short

In the UK, check your rolling 12-month turnover every month against £90,000; in France, watch €37,500 for services and €85,000 for goods. Register voluntarily only if your customers are businesses or you have big purchases to reclaim. First step: add up the last 12 months of what you’ve actually been paid, and write the date you’ll check again.

Sources

• GOV.UK, “Register for VAT” (threshold, 30-day rules, effective date, non-UK businesses): gov.uk/register-for-vat.
• GOV.UK, “Cancel your VAT registration” (£88,000): gov.uk/register-for-vat/cancel-your-registration.
• GOV.UK, “VAT Flat Rate Scheme” and “How much you pay” (£150,000 limit, flat rates, 1% first-year discount, 16.5% limited cost rate): gov.uk/vat-flat-rate-scheme.
• Service-Public Entreprendre, “Franchise en base de TVA” (2026 thresholds, crossing rules, option), checked 1 January 2026: entreprendre.service-public.gouv.fr/vosdroits/F21746.
• Vie-publique.fr, “Loi Midy du 3 novembre 2025” (Law no. 2025-1044 repealing the €25,000 threshold): vie-publique.fr.
• European Commission, “VAT rules for small enterprises – SME scheme” (cross-border exemption from 1 January 2025, €100,000, non-EU businesses excluded): sme-vat-rules.ec.europa.eu.

Also available in Français.