When must you register for VAT?

This is the one small business figure that almost every article, accountant's blog post and forum answer currently gets wrong, because it sat still for so long that everybody stopped checking it.

The thresholds

Compulsory registration. The compulsory threshold is R2 300 000. It was raised in Budget 2026 and took effect on 1 April 2026, having previously stood at R1 million.

Voluntary registration. You may register voluntarily where the value of your taxable supplies has exceeded R120 000 in the preceding 12 months, raised from R50 000 on the same date.

The increase was explicitly a small business measure: compliance costs had not moved with the cost of doing business, and a great many very small enterprises were being pulled into a monthly filing regime they had no capacity for.

The practical consequence for you is that a business which would have had to register last year may not have to now, and that any figure you were given before April 2026 is out of date.

The rolling twelve months

This is the part that catches people even when they know the number.

The test is the value of taxable supplies made in any consecutive 12-month period. The word consecutive is doing the work. It is not your financial year, it is not the calendar year, and it does not reset in March.

In practice it means looking back at the end of every month over the preceding twelve and adding up. A business with an excellent December and a quiet January can cross the line in a month in which it did badly, because the month that dropped out of the window was worse than the one that came in.

There is also a forward-looking limb. The obligation arises where it is clear that the threshold will be exceeded, for example where you have signed a contract that will take you over it. You do not get to wait for the money to arrive if the certainty is already there.

Taxable supplies, not turnover

A distinction worth getting right, because it changes the arithmetic.

The threshold is measured on taxable supplies, meaning supplies that would be subject to VAT at the standard rate or the zero rate. That is not the same as everything that passes through your bank account.

Exempt supplies do not count. Certain financial services, residential rental and some others are exempt, and a business whose income is exempt does not approach the threshold at all no matter how large it becomes.

Zero-rated supplies do count. An exporter charging VAT at zero per cent is making taxable supplies, and can be required to register even though it collects no output tax.

Capital assets sold are generally excluded from the calculation. Selling a delivery vehicle does not push you over the line.

If your income is mixed, get this counted properly rather than estimated, because being just over or just under the line has completely different consequences.

The 21 business days

Once the threshold is exceeded, or once it becomes clear it will be, you must apply for registration within 21 business days.

Business days, not calendar days, which is a little more generous than it looks. It is still short.

What happens if you are late is the reason to take the deadline seriously. SARS can register you from the date liability arose rather than the date you applied, and you then owe output tax on the supplies you already made, on invoices where you charged your customers nothing for VAT. That money comes out of your margin, because you cannot realistically go back to customers months later and ask for another 15%. Penalties and interest sit on top.

That single mechanism is why the most expensive VAT mistake a small business makes is not charging the wrong rate. It is registering late.

Should you register voluntarily?

Where you are below the compulsory figure, it becomes a business decision rather than a legal one, and it genuinely cuts both ways.

Reasons to register:

You can claim input tax. If you buy stock, equipment or services from VAT vendors, you recover the VAT on them. For a business with substantial inputs this can be worth a great deal.

Your customers may require it. Businesses that are themselves registered prefer suppliers who can issue a tax invoice, because otherwise they cannot claim the input tax. In some sectors being unregistered effectively excludes you from business-to-business work.

It signals scale. Rightly or wrongly, some buyers read a VAT number as a sign that a supplier is established.

Reasons not to:

Your prices effectively go up by 15% to consumers who cannot claim input tax. If you sell to the public, a registered competitor has no advantage over you and you have just made yourself more expensive.

The administration is real. Returns, records, tax invoices that comply with the Act, and the discipline of setting aside money that is not yours. Our guide on what must be on a tax invoice sets out the requirements, which are specific and are enforced.

Cash flow. You collect VAT and hold it until the return is due, and a business that spends it has a problem that compounds.

The rough rule: if you sell mainly to other registered businesses, or you have large input costs, registration usually helps. If you sell mainly to consumers and your inputs are small, it usually does not.

Turnover tax as an alternative

Very small businesses sometimes have a better option altogether.

Turnover tax is a simplified regime for micro businesses, replacing income tax, and it interacts with the VAT question. It is not automatically better, and the exclusions matter, but it is worth knowing about before defaulting to the standard path.

Our guide on choosing between a sole proprietorship and a company deals with the related structural decision, and our guide on registering a company with CIPC covers the mechanics.

How to register

Registration is done through SARS eFiling, and the application is supported by documents: identity documents of the representative, proof of the business address, bank details in the name of the entity, and proof of the taxable supplies relied on.

Two practical points.

The bank account has to match. A registration in the name of a company, supported by a personal bank account, is a common cause of delay.

Keep the proof of turnover. Invoices and bank statements evidencing the supplies, because SARS will ask for them, both to confirm that you have crossed the compulsory threshold and to satisfy itself on a voluntary application.

Once registered you are a vendor, with obligations that start immediately: charging VAT on taxable supplies, issuing compliant tax invoices, filing returns on your allocated cycle, and keeping records for the prescribed period.

What to do now

Work out where you actually are. Add up your taxable supplies over the last twelve months, not your last financial year.

Set a monthly check. A rolling test needs a rolling look. A note in your calendar at month end to add up the previous twelve is fifteen minutes that prevents the expensive version of this.

Look forward as well. If a contract you have signed will take you over, the clock may already be running.

Confirm the current figures. Thresholds are set in the Budget and they now demonstrably do change. Check with SARS rather than relying on any article, including this one.

Worked example

This example is illustrative. A print and signage business invoices roughly R180 000 a month, mostly to other businesses. At the end of March its taxable supplies over the preceding twelve months come to R2 150 000.

It is under the compulsory threshold, so registration is not yet required. But at R180 000 a month it will cross within about a month, so the sensible course is to prepare the application now rather than to wait.

In April it invoices R210 000, and the rolling twelve-month total passes R2 300 000. The 21 business days run from that point, and the business applies inside the period.

Now the version that goes wrong. The owner checks the position once a year when the accountant does the financial statements, in October. By then the rolling total has been above the threshold for six months. SARS registers the business with effect from the date liability arose, and it owes output tax on six months of invoices on which it charged its customers nothing for VAT. On R1.2 million of supplies in that period, the VAT it should have collected is around R156 000, and it did not collect it. Penalties and interest follow.

Nothing about the business was different in the two versions. The difference was a fifteen-minute calculation done monthly instead of annually.