What is a VAT threshold?
A threshold is the level of sales at which a business has to register for VAT in a country. Below it, registration is not required; once a business goes over it, it has a set period to register and start charging that country's VAT.
The threshold does not apply to everyone in the same way, though. Where your company is registered, what you sell and who you sell to decide whether it applies to you at all. The tool weighs those three answers together with your sales figures.
United Kingdom: the £90,000 rule
A company incorporated in the UK (UK Ltd) must register for VAT once its VAT-taxable sales over the last 12 months go above £90,000. It has to apply to HMRC within 30 days of the end of the month it went over. If it expects to go over the threshold in the next 30 days alone, it must register by the end of that 30-day period.
Businesses not established in the UK are treated differently: there is no threshold for them. A US LLC or a company in Türkiye needs a UK VAT registration as soon as it sells digital services to UK consumers.
- You can register voluntarily while under the threshold.
- For services sold to VAT-registered businesses, the buyer usually accounts for the VAT (reverse charge).
- On consignments of goods worth £135 or less, VAT is charged at the point of sale; when you sell through a marketplace, the marketplace does it.
European Union: the €10,000 threshold and OSS
Businesses established in a single EU country use one shared threshold for sales of digital services and distance sales of goods to consumers in other EU countries: €10,000 a year. If sales go above it in the previous or the current calendar year, the customer's country VAT applies. Instead of registering in every country, you can report and pay through the One-Stop Shop (OSS) in a single return.
Businesses established outside the EU cannot use this threshold. When a company in the UK, the US or Türkiye sells digital services to an EU consumer, customer-country VAT applies from the first sale; it can be reported through a single non-Union OSS registration.
| Situation | United Kingdom | European Union |
|---|---|---|
| Established there, digital sales to consumers | £90,000 threshold | €10,000 shared threshold (to other EU countries) |
| Established elsewhere, digital sales to consumers | Register from the first sale | VAT from the first sale (non-Union OSS) |
| Services sold to businesses | Usually reverse charge | Usually reverse charge |
| Physical goods | Depends on consignment value (£135) and stock location | Depends on consignment value (€150) and stock location |
Digital services, professional services and goods
For digital services such as SaaS, apps, online courses and downloadable content, VAT is as a rule due where the customer is. That is why thresholds matter most for these sales.
For professional services such as consulting, agency work or software development, VAT on sales to consumers is generally due where the supplier is based, and the €10,000 threshold does not cover them. Events and property-related services are among the exceptions.
For physical goods, the consignment value, the country your stock ships from and whether you use a marketplace all change the answer. In that case the tool tells you to check with an adviser and lists what to look out for.
About US sales tax
The US has no federal VAT; sales tax works state by state. Most states require remote sellers with more than $100,000 of yearly sales to register, and some set a higher figure. This tool does not calculate US states.
How to use the tool
- 1Choose the country where the selling company is registered.
- 2Pick what brings in most of your revenue and who your customers are.
- 3Enter your sales: the last 12 months for the UK, last year or this year so far for the EU.
- 4The result shows your registration status in each region and how close you are to the threshold.