growth & reporting · 2 september 2026 · 8 min read

marketing through the VAT threshold: what changes at £90,000

HMRC asked small businesses trading just below the VAT threshold whether they were deliberately holding themselves there. One in five said yes. The most common method sits in a category HMRC named, in its own report, “closing the business/stopping advertising”.

That is a tax line changing marketing behaviour, documented by the tax authority. Which is why a marketing company is writing about the VAT threshold at all: at £90,000 the decision in front of a UK small business is rarely “should I register”. It is should I keep selling.

Before anything else: this is a plain-English summary, not tax or legal advice. We're a marketing company, not accountants. Every figure below links to the source it came from, the threshold moves at Budgets, and anything with real money on it deserves your accountant or HMRC.

what the VAT threshold is, in two tests

There are two, and small businesses usually only know the first. From GOV.UK:

• The backward test. You must register if your total taxable turnover for the last 12 months goes over £90,000. It's a rolling 12 months, not your financial year — the window moves with you every month.
• The forward test. You must register if you realise your total taxable turnover is going to go over £90,000 in the next 30 days. One large order can trigger this on its own, before your rolling total has moved at all.

The timing is generous once you cross. GOV.UK's own worked example: exceed the threshold on 15 July and you must register by 30 August, with an effective date of 1 September. You are not charging VAT retrospectively on the sales that took you over.

Two more numbers. You can register voluntarily at any turnover below £90,000. And if you're registered and taxable turnover falls below £88,000, cancelling is optional — the exit door sits £2,000 below the entrance.

why it behaves like a cliff and not a ramp

This is what makes the anxiety rational, not silly. Once you're registered, VAT applies to your whole taxable turnover from that date — not just to the slice above £90,000.

The Office of Tax Simplification put this in writing in its 2017 review of VAT. The threshold, it found, “distorts behaviour by creating a significant cliff-edge, resulting in a bunching effect just below the £85,000 turnover level, rather than the smoother pattern one would otherwise expect” — and is “presenting a significant disincentive to maximising the potential growth of some businesses” (Value added tax: routes to simplification, November 2017; the threshold was £85,000 then and the chart it cites uses 2014/15 HMRC data). The OTS names two causes of the bunching: businesses legally limiting expansion, and businesses illegally suppressing recorded takings.

The arithmetic, at the standard 20% rate, is ours rather than HMRC's — but it's simple. If you register and keep your prices exactly where they are, those prices become VAT-inclusive. On £90,000 of sales, £15,000 of it is now VAT. You keep £75,000. To get back to netting £90,000 you'd need to sell about £108,000. That gap is the real reason people stall: for a stretch of turnover above the threshold, you work more and take home less.

Two caveats. It ignores the VAT you reclaim on what you buy — which is why the squeeze is worst for low-input service businesses (a consultant, a cleaner, a tutor) and mildest for those buying a lot of standard-rated stock. And it assumes consumer customers: sell to VAT-registered businesses and they reclaim it, leaving your effective price unchanged.

what HMRC found businesses actually do — and what they switch off first

The evidence here is HMRC Research Report 446, Behaviours and experiences in relation to VAT registration, carried out by Ipsos MORI and published in November 2017. It surveyed 2,013 businesses, including around 600 trading below but close to the threshold (£82,000 at the time).

20% of those borderline businesses admitted taking some action to stay under. They were more likely to plan to stay the same size rather than grow in the coming year (23% against 15%) and more likely to sell mainly to consumers (22% against 13%). Among the 146 who restricted, the methods were:

• Closing the business / stopping advertising — 47%
• Refusing or turning down work — 21%
• Asking customers to buy the materials — 16%
• Reducing prices to stay under, and splitting the business — 10% each
• Monitoring accounts to stay under — 7%

Be careful with that 47%, because most write-ups aren't. It is a single combined category, and HMRC's own explanation of it points at closing for a period — “part of the week, month or year” — not at advertising. The report never separates the two, so nobody can honestly say how many switched off their marketing specifically. We'd rather tell you that than quote a number we can't stand behind.

What the report does show, in its own case study, is what suppression looks like in practice. A seller of vintage and antique items described staying under by not attending fairs and not updating her website at certain times of the year, and by telling customers she had no stock when she did. In her words: “To date I have ensured that the turnover level is under the VAT limit deliberately, to the point that I actually stop working most years for a certain amount of time.” The report records that she found it embarrassing and frustrating.

Going quiet is the cheapest lever a business owner has, so it gets pulled first — no conversation with a customer, no visible refusal, no awkwardness. It is also the lever with the longest tail: demand you stop generating in October is demand you don't have in February.

the fear is bigger than the outcome

The same research surveyed businesses that had actually registered, and the contrast is the most useful thing in it.

Before: 78% of borderline businesses agreed they would find it difficult to increase prices to cover VAT. Asked why they were holding under the line, their top answers were reduced profits (20%), having to raise prices (18%) and losing customers (18%).

After: among businesses that had registered, 52% kept their prices the same and only 25% increased them (23% had been registered from the start). Sole traders were more likely to raise prices than companies — 31% against 23%.

So the headline fear — prices up a fifth, customers gone — is not what most registering businesses did. Half absorbed it. That doesn't make it painless; those who did took the margin hit above. But the modelled catastrophe and the recorded outcome are different events, and the decision deserves the second one.

On reputation the report is mixed, and both halves matter: fewer than one in five registered businesses spontaneously mentioned any benefit to image, but around seven in ten agreed registration had improved it when prompted. Prompted agreement is weak evidence — treat “VAT registration makes you look established” as plausible, not proven.

what actually changes in your marketing at £90,000

Less than people expect — and not what they brace for.

1. If you sell mainly to businesses: almost nothing. Your VAT-registered customers reclaim it. The report bears this out — only 22% of firms with higher business-to-business sales saw no benefit to registering, against 43% of mainly consumer-facing ones. Keep marketing exactly as you were.
2. If you sell to consumers: it's a pricing-presentation decision, not a demand problem. 68% of registered businesses include VAT in the prices they quote, rising to 73% among those above the threshold. Decide whether your listed prices are inclusive, change them once, everywhere, and stop relitigating it.
3. Your positioning can absorb what your price can't. If a competing sole trader is 20% cheaper because they're under the line, the answer isn't a louder discount — it's being visibly the safer choice. That's the same job as any other small-business marketing in the UK: be findable, be specific, be obviously competent.
4. Nothing about your content calendar changes. Blogs, email and social don't become less effective at £90,001. If you're going to slow down, slow the selling, not the being-known — they run on different clocks.

when staying under really is the right call

Sometimes it is, and we'd rather say so than sell you a package. Limiting your expansion to stay below the threshold is entirely legal — the OTS says as much. For a consumer-facing service business with almost nothing to reclaim, deliberately running at £85,000 can be defensible for a year.

The distinction that matters is deliberate versus drifting. Deliberate looks like a number you've worked out with your accountant, a plan for the year you'll cross, and marketing that keeps running so the pipeline exists when you decide to go. Drifting looks like the case study above: a website left to rot, opportunities declined one at a time, and a business that has quietly made itself hard to find. The first is a strategy. The second is a slow exit.

The cost is never only the turnover you didn't book. Search rankings, an email list and a habit of publishing all decay when you stop; that's why we treat consistency as the thing that compounds, the same way we do when working out whether marketing is working at all.

marketing through the VAT threshold, deliberately

The VAT threshold is £90,000 on a rolling 12 months, with a 30-day forward test that can catch you early. Crossing it costs real money if you sell to consumers and buy little — roughly the gap between £90,000 and £108,000 of turnover, on our arithmetic. HMRC's research says one in five borderline businesses hold themselves under, and the cheapest way to do that is to stop being visible.

But that same research says half the businesses that crossed kept their prices exactly where they were. The threshold is a pricing and positioning decision with a date attached. It is not a reason to go quiet — and if going quiet is the plan, it should be a decision someone made on purpose, with a number beside it, rather than the thing that happens because switching off the marketing was the easiest lever to reach.

Check the current figure on GOV.UK before acting on any of this. It moves at Budgets — the OTS report quoted above was written when it was £85,000.