VAT explained · UK guide · 2026
What is VAT? How VAT works in the UK.
Source: gov.uk/vat-rates. [VERIFY all figures before acting.]
What is VAT?
VAT (Value Added Tax) is a consumption tax charged on most UK goods and services. The standard rate is 20% [VERIFY at gov.uk]. Businesses with taxable turnover above the registration threshold must register, charge VAT to customers, and pay it to HMRC quarterly. Registered businesses can reclaim VAT paid on business purchases.
UK VAT rates [VERIFY]
| Rate | Amount [VERIFY] | Examples |
|---|---|---|
| Standard rate | 20% [VERIFY] | Most goods and services — electronics, clothing, professional fees |
| Reduced rate | 5% [VERIFY] | Domestic fuel, children's car seats, some home improvements |
| Zero rate | 0% [VERIFY] | Most food, children's clothing, books, newspapers |
| Exempt | No VAT charged [VERIFY] | Medical, education, insurance, finance, most property lettings |
[VERIFY all rates at gov.uk/vat-rates]
FAQs
What is VAT?
VAT (Value Added Tax) is a tax charged on the sale of most goods and services in the UK. Businesses registered for VAT must add VAT to their prices, collect it from customers, and pay it to HMRC. VAT-registered businesses can also reclaim VAT they have paid on business purchases (input VAT). The standard rate of VAT is currently 20% [VERIFY at gov.uk/vat-rates].
Who pays VAT?
Ultimately, the end consumer pays VAT — it is included in the price of goods and services. VAT-registered businesses act as collectors on HMRC's behalf. They add VAT to their sales (output VAT), reclaim VAT on their purchases (input VAT), and pay the difference to HMRC each quarter. If input VAT exceeds output VAT, HMRC repays the difference.
What are the UK VAT rates?
Standard rate: 20% — applies to most goods and services [VERIFY]. Reduced rate: 5% — applies to some goods and services including domestic fuel, children's car seats, and certain home improvements [VERIFY]. Zero rate: 0% — applies to most food, children's clothing, books, and newspapers. These transactions are taxable but at 0% — different from exempt supplies. Exempt supplies do not attract VAT at all. [VERIFY all rates at gov.uk/vat-rates]
What is input VAT and output VAT?
Output VAT is VAT you charge on your sales. Input VAT is VAT you pay on your business purchases. Each VAT return calculates: output VAT minus input VAT. If output VAT exceeds input VAT, you pay the difference to HMRC. If input VAT exceeds output VAT (e.g. in a period of heavy investment), HMRC repays the difference.
When does a business need to register for VAT?
Mandatory registration is required when taxable turnover in any rolling 12-month period exceeds the VAT threshold (currently £90,000) [VERIFY at gov.uk/vat-registration-thresholds]. You must register within 30 days of crossing the threshold. Voluntary registration is available at any turnover level.
Questions about VAT registration?
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