Went Over the VAT Threshold by Accident? Builder's Plan
The short answer
Register now. HMRC registers you from the date you should have registered, and you owe VAT on sales from then. Telling HMRC yourself, quickly, keeps any penalty as low as the rules allow: for a non-deliberate slip told within 12 months, the range starts at 0%.
- Check the dates. You must register within 30 days of the end of the month your rolling 12-month taxable turnover went over £90,000.
- VAT is owed from the effective date, even on sales you didn't charge VAT on. You can set VAT on your costs against it.
- Tell HMRC before they tell you. Non-deliberate, unprompted and within 12 months: penalty range 0% to 30% of the VAT due.
- Fix the numbers, then the system. Check your rolling turnover every month, not at year end.
You're doing the books and the number jumps out. You went over the VAT threshold by accident: more than £90,000 invoiced in the last 12 months, and no VAT registration.
It happens to a lot of growing builders, and some of those months were a while ago. The jobs got bigger, the turnover crept up, and nobody was watching the rolling total. This isn't the end of the business, but the clock matters.
Here's the order to fix it in. To go through your numbers and prices with our team, book a free strategy call.
This is general information from a contractor's experience, not tax advice. For your situation, speak to a construction-specialist accountant.
Work out when you went over
The threshold is not based on the tax year. It's a rolling 12 months, checked at the end of every month.
| Question | The rule (gov.uk) |
|---|---|
| What's the threshold? | £90,000 taxable turnover (since 1 April 2024; it was £85,000) |
| What's measured? | Your last 12 months, at the end of each month |
| What counts? | Everything you sell that isn't exempt, including zero-rated work such as most new-build homes |
| Deadline to register | Within 30 days of the end of the month you went over |
| VAT starts from | The first day of the second month after you went over |
Example: your 12-month total passed £90,000 at the end of March 2026. You should have registered by 30 April. Your effective date is 1 May 2026.
There's a second test. Say a big job pays in one go. If you expect to go over £90,000 in the next 30 days alone, register by the end of those 30 days.
What you owe now
HMRC registers you from the date you should have been registered, not the date you tell them. From that date you owe VAT on your sales, even if you didn't charge it.
How big the bill is depends on who your clients are.
| Your client | What it means for the back-dated VAT |
|---|---|
| Homeowners | They can't reclaim VAT, and you agreed fixed prices. If you can't add VAT now, the VAT may have to come out of the price you were paid |
| VAT-registered businesses (not CIS) | You can usually send a VAT invoice once you have your number. Most will pay it, because they reclaim it |
| Main contractors, CIS work | Often the domestic reverse charge: the contractor accounts for the VAT, not you. Ask your accountant how much of your bill this removes |
| New-build homes | Usually zero-rated: counts towards the threshold, but no VAT to pay on it |
Worked example (illustrative). Since your effective date you've been paid £48,000 by homeowners on fixed prices. If that has to be treated as including VAT, the VAT is £48,000 ÷ 6 = £8,000. You also paid £3,000 VAT on materials in the same period, with proper VAT invoices. That comes off: you owe about £5,000.
You can also reclaim VAT on some things bought before your effective date. That covers goods up to 4 years old that you still have, and services from the last 6 months.
A VAT surprise is usually a cash and pricing problem. Take the free 4-minute Construction Business Scorecard: 18 questions on your pipeline, sales, pricing, cash flow and systems, with your weakest area shown first.
Not sure how VAT changes your prices?
Book a free call with our team. We'll look at your jobs, your clients and how to price with VAT from now on.
The penalty, and how to keep it low
HMRC calls this a "failure to notify". The penalty is a percentage of the VAT you should have paid. Where you land depends on three things: was it deliberate, did you tell HMRC first, and how late are you?
| Your situation | Penalty range |
|---|---|
| Not deliberate, you told HMRC, within 12 months | 0% to 30% |
| Not deliberate, you told HMRC, after 12 months | 10% to 30% |
| Not deliberate, HMRC found it first | 10% to 30% (20% to 30% after 12 months) |
| Deliberate | 20% to 70% |
Inside each range, HMRC reduces the penalty for telling, helping and giving access to records (up to 30%, 40% and 30%). On our £5,000 example, an unprompted, non-deliberate slip told within 12 months could mean anything from £0 to £1,500.
If something outside your control stopped you (serious illness, for example), you may have a reasonable excuse. Then there's no penalty, as long as you told HMRC without delay once it was over.
Waiting until the year-end accounts. Every month you wait makes the bill bigger and can push you into the "after 12 months" range.
The next 7 days
- Day 1: pull every invoice for the last 24 months. Work out your 12-month total at the end of each month and find your effective date.
- Day 2: call a construction-specialist accountant. Sort your sales into homeowner, business, reverse charge and zero-rated.
- Day 3: register for VAT online and tell HMRC the real date you went over. Don't wait for a reply before planning the cash.
- Days 4–7: contact business clients about VAT invoices. Ring-fence money for the bill. If you can't pay it in one go, read what to do when you can't pay the VAT bill and ask HMRC for Time to Pay.
Until your VAT number arrives, don't show VAT as a separate line on any invoice.
Just found out you're over the threshold?
Book a free call and we'll look at your numbers and prices with you.
Price with VAT from now on
The real shock for most builders isn't the back-dated bill. It's that every homeowner quote now goes up by 20%, or your margin drops by a sixth.
Don't just add 20% and hope. Check your prices against what your best competitors charge with VAT. Look at which jobs you win, and lift your price where you're already the cheapest. On a 20% net margin, absorbing VAT on a homeowner job wipes out most of it.
Handled well, VAT is the point where the business grows, not stalls. This is the kind of decision Sviat works through 1-to-1 with owners: pricing, cash and the systems that stop surprises. He still runs Craftex, a London main contractor, so the advice comes from a working company. To work through yours, book a free strategy call.
The Cash Flow & Margin Blueprint
Ring-fence tax money, deposits and stage payments, and a 4-week cash forecast you update every Friday.
Get the free guideThis is general information on UK VAT rules as of October 2026, not tax advice. For your situation, speak to a construction-specialist accountant.
Stop it happening again
- Your rolling 12-month turnover is checked at the end of every month
- VAT money goes into a separate tax account the day you're paid
- Every quote shows whether the price includes VAT
- You know which clients are reverse charge, zero-rated or standard
- Your accountant checks your VAT return before it goes in
