How VAT works in United Kingdom
VAT (Value Added Tax) in the United Kingdom is administered by HMRC. The standard rate is 20%, with a reduced rate of 5% for items like home energy and a zero rate for most food, books, and children's clothing. Businesses charge VAT on taxable supplies and reclaim VAT on business purchases via quarterly returns.
VAT rates
| Type | Rate | Applies to |
|---|---|---|
| standard | 20% | Most goods and services |
| reduced | 5% | Children's car seats, home energy |
| zero | 0% | Most food, books, children's clothes |
Do I need to register for VAT in United Kingdom?
Registration threshold: ยฃ90,000 annual taxable turnover.
You must register for VAT if your taxable turnover exceeds ยฃ90,000 in any rolling 12-month period. Register online at gov.uk through your Government Gateway account. You can also register voluntarily below the threshold to reclaim input VAT.
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Common mistakes
- Missing the rolling 12-month threshold (it's not the tax year)
- Reclaiming VAT on entertainment or non-business expenses
- Filing returns late under Making Tax Digital (MTD) โ even nil returns must be submitted
- Forgetting to charge VAT on digital services to UK consumers
FAQs
What is the current UK VAT rate?โ
The standard VAT rate in the UK is 20%.
Do I need to register for VAT in the UK?โ
You must register if your taxable turnover exceeds ยฃ90,000 in any rolling 12-month period.
Can I reclaim VAT as a freelancer?โ
Yes, once registered you can reclaim VAT on legitimate business expenses.