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Results are calculated in real time. VAT rates are based on HMRC 2025/26 rates.
Understanding UK VAT Rates
Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. Businesses registered for VAT must charge VAT on their sales (output tax) and can reclaim VAT on their purchases (input tax). The difference is paid to or reclaimed from HMRC.
The Three UK VAT Rates
There are three rates of VAT in the UK for 2025/26:
| Rate | Percentage | Applies To |
|---|---|---|
| Standard Rate | 20% | Most goods and services |
| Reduced Rate | 5% | Home energy, child car seats, sanitary products |
| Zero Rate | 0% | Most food, children's clothes, books, public transport |
VAT Registration Threshold
You must register for VAT with HMRC if your taxable turnover exceeds £90,000 in any rolling 12-month period. You can also voluntarily register if your turnover is below this threshold, which can be beneficial if you sell mostly to VAT-registered businesses or if you have significant input VAT to reclaim.
VAT Schemes for Small Businesses
HMRC offers several VAT schemes designed to simplify the process for small businesses:
- Flat Rate Scheme – Pay a fixed percentage of your gross turnover instead of tracking individual input and output VAT. Available if your VAT-taxable turnover is £150,000 or less (excluding VAT).
- Cash Accounting Scheme – Account for VAT based on payments received and made, rather than invoice dates. Useful for managing cash flow. Available if your estimated VAT-taxable turnover is £1.35 million or less.
- Annual Accounting Scheme – Submit one VAT return per year instead of quarterly, with interim payments throughout the year. Available if your estimated VAT-taxable turnover is £1.35 million or less.
Items at Each VAT Rate
Standard Rate (20%) items include most consumer goods, electronics, furniture, professional services, restaurant meals, alcohol, and clothing for adults.
Reduced Rate (5%) items include domestic fuel and power, installation of energy-saving materials, children's car seats, sanitary products, and smoking cessation products.
Zero-rated (0%) items include most food and drink (excluding catering, confectionery, and hot takeaways), books and newspapers, children's clothing and footwear, new-build residential property, public transport, and prescribed medicines.
Frequently Asked Questions
The standard UK VAT rate for 2025/26 is 20%. This rate applies to most goods and services sold in the UK. There is also a reduced rate of 5% and a zero rate of 0% for specific categories of goods and services.
To add VAT at the standard rate of 20%, multiply the net (ex-VAT) price by 1.20. For example, if the net price is £100, the VAT-inclusive price is £100 × 1.20 = £120. The VAT amount is £20.
To remove VAT at 20% from a gross (VAT-inclusive) price, divide by 1.20. For example, if the gross price is £120, the net price is £120 ÷ 1.20 = £100, and the VAT amount is £20.
The VAT registration threshold for 2025/26 is £90,000. If your taxable turnover exceeds this amount in any rolling 12-month period, you must register for VAT with HMRC. You can also voluntarily register below this threshold.
Zero-rated goods and services include most food and drink (not catering or hot takeaways), books and newspapers, children's clothing and shoes, public transport, and new-build residential property. Businesses selling zero-rated items can still reclaim input VAT.
The VAT Flat Rate Scheme lets small businesses pay a fixed percentage of their gross turnover as VAT instead of tracking input and output VAT separately. The percentage varies by industry (e.g., 14.5% for computer services, 12% for management consultancy). You can join if your VAT-taxable turnover is £150,000 or less.