VAT for a letting agency: the £90,000 test on fee income, with a rolling 12 months and the 30-day rule worked

An agency grows by a few landlords in the summer and the accounts show fee income climbing. Nobody has asked whether the business has to charge VAT on those fees. The test is a running total, and it is easy to pass without noticing.

What GOV.UK says

The thresholds page says a business has to register for VAT if its VAT taxable turnover is more than £90,000. It also says a business below that level can register voluntarily.

The register page sets out two tests:

• The look-back test. Register if your total taxable turnover for the last 12 months goes over £90,000. You register within 30 days of the end of the month when you went over, and your effective date of registration is the first day of the second month after you went over.
• The forward-looking test. Register if you expect your taxable turnover to go over £90,000 in the next 30 days. You register by the end of that 30-day period, and the effective date is the date you realised, not the date turnover crossed the line.

It defines taxable turnover as the total value of everything you sell that is not VAT exempt or out of scope. It also says you must pay HMRC any VAT you owe from the date they register you.

The look-back test, worked

Take a small agency. I made up the figures, so they are an illustration and not typical. Fee income is £7,200 a month from September 2025 to June 2026 (10 months), then £9,000 a month for July, August and September 2026 after three landlords join. Each month's total is the previous 11 months plus the new one.

The 12 months to 30 September 2026 are the first to pass the line.

• Went over at the end of September 2026.
• Register within 30 days of the end of that month: by 30 October 2026.
• Effective date: the first day of the second month after going over, which is 1 November 2026.

Today is 21 October 2026, so in this example there are nine days left to register. Missing it is a separate problem; GOV.UK's page does not set out penalties and I did not read them.

The forward-looking test

Suppose the same agency signed a block of 40 flats in the first week of October and expected £30,000 of fees within the next 30 days. The agency should check not only the rolling total but what is signed. If the expected total in the next 30 days passes £90,000, the register page says to register by the end of that 30-day period, with an effective date of the day you realised.

What to do

• Keep a monthly rolling total. One column of fee income, one of the last 12 months added up. Look at it every month end, not at year end.
• Count what is taxable, not what you handle. The page says taxable turnover is what you sell that is not exempt or out of scope. Whether your management fee, letting fee and renewal fee each fall inside it is a question for your accountant or HMRC; I did not read that guidance, and the example simply treats all fee income as taxable.
• Diary the dates. Put the 30-day deadline and the effective date in the calendar as soon as the total passes the line. The compliance date tracker is a place to hold them.
• Watch the other costs of growth. More landlords mean more client money to protect and more redress fees: see what an agency pays for redress, client money protection and ICO.

What I did not read

I did not read HMRC's guidance on which letting-agency fees are standard-rated, exempt or out of scope, on the flat rate scheme, on voluntary registration benefits, on reclaiming VAT on costs, on penalties for late registration, or on the deregistration threshold. I did not check whether the figure changes after 21 October 2026.

Overlyft builds AI staff who join your agency team and take the month-end fee schedule: they total the last 12 months of fee income, flag the month the running figure approaches £90,000 and draft the registration reminder for a person to approve.

This is general information, not legal or financial advice. Check the GOV.UK pages and speak to your accountant or HMRC for the case in front of you.