VAT is a consumption tax on most UK goods and services. The end consumer pays it, but businesses collect and remit it to HMRC. Rates are 20%, 5%, and 0%, depending on the transaction.

VAT rates in the United Kingdom

• Standard rate 20% – most goods and services (e.g., clothing, electronics, fuel).
• Reduced rate 5% – specific products like: child car seats, some social housing and social services, domestic electricity/gas/district heating, some domestic energy-efficient items, domestic LPG gas and heating oil, some private renovations, some medical equipment for disabled persons.
• Zero-rated supplies 0% – e.g., domestic/international passenger transport, newspapers/magazines, basic minimally processed food, water supply, some medical articles, some children’s products, live animals, animal feed.
• Exempt supplies – e.g., entry fees for certain cultural events (museums, art exhibitions, zoos, performances), care/treatment by qualifying institutions (hospitals, hospices, nursing homes), health services by registered doctors/dentists/optometrists/pharmacists, education and vocational training by authorised bodies (schools, colleges, universities).

  When to Register for VAT

  A business must register for VAT if either of the following applies:

  • Its total taxable turnover for the last 12 months exceeds £90,000 (the VAT threshold).
  • It expects its taxable turnover to exceed £90,000 in the next 30 days.

  A business must also register (regardless of turnover) if all of the following are true:

  • It is based outside the UK.
  • Its business is based outside the UK.
  • It supplies (or expects to supply) any goods or services to the UK within the next 30 days.

  Non-UK businesses should refer to the guidance on non-established taxable persons (NETPs) in VAT Notice 700/1 for further details.

  Businesses may choose to register voluntarily if their turnover is below £90,000.

  A business does not need to register if it only sells VAT-exempt or ‘out of scope’ goods and services. Special rules apply to private schools.

  Taxable Turnover

  Taxable turnover is the total value of all sales that are not VAT-exempt or ‘out of scope’. It includes:

  • Zero-rated, reduced-rated, and standard-rated goods and services
  • Goods hired or loaned to customers
  • Business goods used for personal reasons
  • Goods bartered, part-exchanged, or given as gifts
  • Services received from overseas businesses under the reverse charge
  • Goods and services subject to the domestic reverse charge
  • Self-supplied building work over £100,000

  Timing of Registration

  If the threshold has been exceeded in the last 12 months

  The business must register within 30 days of the end of the month in which it exceeded £90,000. The effective date of registration is the first day of the second month after the threshold was crossed.

  If the threshold will be exceeded in the next 30 days

  The business must register by the end of that 30-day period. The effective date of registration is the date it realised the threshold would be exceeded.

  Northern Ireland Businesses

  A business in Northern Ireland that only sells VAT-exempt or ‘out of scope’ goods and services must register if it buys goods worth more than £90,000 in any 12-month period from EU VAT-registered suppliers for use in its business.

  Exemption from Registration

  Businesses whose supplies are mostly zero-rated may apply for an exemption from registration. Non-established taxable persons (NETPs) must have all taxable supplies zero-rated to qualify. Applications can be made online or by post using form VAT1 (and VAT1C if required for asset disposals where VAT has been reclaimed).

  HMRC will notify the business whether the exemption is approved. If rejected, the business will be registered for VAT.

  Businesses must pay any VAT owed from the effective date of registration.