The UK’s VAT Rate Explained

Updated on July 19, 2022

What is VAT?

In the UK, sales of goods and services are subject to VAT, or Value Added Tax.

People pay this as a form of “consumption tax,” and because companies collect it for the government, it is classified as an “indirect tax.”

What are the current VAT rates in the UK?

In the United Kingdom, VAT is charged at a standard rate of 20% on most purchases.

However, as a company, you must be aware of additional VAT rates.

VAT is imposed at a 5 percent reduced rate on sanitary items, energy-saving measures, and kid car seats.

Most food, books, newspapers, and children’s clothing are subject to the zero rate, which is charged at 0%.

The sale of zero-rated goods and services must still be recorded and reported on your VAT return even though no VAT is charged.

In addition, certain things are deemed “exempt.” Postage stamps, as well as financial and property transactions, are among them.

These products and services are exempt from VAT, much like zero-rate items. Your taxable turnover does not include these expenses.

In accordance with EU law, the typical VAT rate in EU countries should not be lower than 15%.

How has the VAT rate changed?

In 1973, the Purchase Tax was repealed in favor of the Value Added Tax (VAT).

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Unlike the VAT, which is charged at the point of sale, the former tax was collected at the point of production and distribution.

Different goods were taxed at different rates under the Purchase Tax.

Governments have raised and lowered the normal rate of VAT over time in response to shifting priorities and the status of the economy.

The prices were as follows:

Yearly average value-added tax rate
In the years 1973-74, 10% of the population
8% from 1974 to 1979
From 1979 to 1991, 15% of the population
Between 1991 and 2008, 17.5% of the population was affected.
15 percent of the population in 2008-2009
One-seventh of a percentage point from 2009 to 2011
20 percent of 2011-present
When computing VAT, it is important to keep in mind that VAT rates can fluctuate.

Your bills and accounts will be correct if you are aware of the current rate. It doesn’t matter what the VAT rate is; our VAT calculator can help you get your numbers right.

Who pays VAT?

Their who sell more than £85,000 worth of goods and services each year must register to collect and remit VAT on those purchases and sales. Other firms are not required to file for VAT.

Businesses must submit a VAT return to HMRC in order to claim the VAT they have collected from their customers.

How do you pay VAT?


VAT payments can be made to HMRC in a variety of ways. Payments can be made on the same day or the next day:

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By phone or online, using Faster Payments.
By filling out a CHAPS online form
A variety of additional payment alternatives are also available, but they may take up to three business days to be processed.

To name a few:

Indirect BACS payments
Order in the house (for some VAT schemes)
Debit or credit cards
Banks and cooperative housing societies
For further information, check out the ‘Pay your VAT bill’ section of the Government’s website.

How to charge VAT

Indirect taxes such as VAT are collected by businesses on behalf of the government, as we’ve seen.

As a result, customers will be charged an extra fee for some goods and services. It’s vital to complete this accurately at the time of sale in order to submit an accurate VAT return and make any payments due to HMRC.

It is necessary to include the following details on invoices:

Numbers on invoices
When the first invoice was issued (and the date the goods and services were supplied if this is different from the invoice date)
Name and location of your company
Taxpayer ID Number (TIN)
Information about the client, such as their name and address.
Products and services that are covered by this policy are outlined in the next section.
It is imperative that each item on your bill is stated in full:

Taxes are not included in the cost of a product.
The sum total
It is important to know the tax rate.
This figure does not include taxes.
Value Added Tax (VAT) to be paid
Any monetary reduction in price

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