Value Added Tax (VAT) is a tax on most goods and services sold in the UK. VAT-registered businesses charge it to their customers and pay it to HMRC, minus the VAT they have paid on their own purchases.
- Standard rate
- 20%
- Registration threshold
- £90,000
- Deregistration threshold
- £88,000
- Returns
- Usually quarterly
How VAT works
VAT is paid by the final customer but collected by businesses. If you are VAT registered you add VAT to your sales (output VAT) and can usually reclaim the VAT on your business purchases (input VAT). Each VAT period you pay HMRC the difference, or HMRC repays you if you have paid out more than you charged.
At the standard rate, adding 20% to a net price multiplies it by 1.20, so £500 net becomes £600 gross, of which £100 is VAT. Removing VAT from a gross price divides it by 1.20.
The VAT rates
There are three rates of VAT, plus exempt, a separate category where VAT does not apply. The standard rate has been 20% since 4 January 2011.
| Rate | VAT charged | Typical examples |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Domestic fuel and power, children's car seats, some energy-saving materials, some building conversions |
| Zero | 0% | Most food, books and newspapers, children's clothes and footwear, most exports |
| Exempt | None | Insurance, most financial services, education, health services, some property lettings |
Zero-rated and exempt are not the same. A zero-rated sale is inside the VAT system: you charge 0% and can reclaim the input VAT on the costs behind it. An exempt sale is outside VAT: you charge nothing and usually cannot reclaim the related input VAT. See the current VAT rate guide or GOV.UK for the full lists.
Do you need to register?
You must register for VAT once your VAT-taxable turnover goes over £90,000 in any rolling 12-month period, in place since 1 April 2024. Taxable turnover means your standard, reduced and zero-rated sales; exempt sales and the sale of capital assets do not count.
- Look back. If the last 12 months have passed £90,000, notify HMRC within 30 days of the end of the month you went over. Registration takes effect from the first day of the second month after that.
- Look forward. If you expect your taxable turnover to pass £90,000 in the next 30 days alone, you must register by the end of that 30-day period.
- Or register early. Voluntary registration below the threshold is allowed, and useful if you sell mainly to other VAT-registered businesses and want to reclaim input VAT.
The deregistration threshold is £88,000. The VAT registration threshold calculator checks where you stand; always confirm the latest figures on GOV.UK.
How VAT returns work
Most VAT-registered businesses file a return every quarter. It totals the VAT you have charged and the VAT you are reclaiming; the difference is what you pay or what HMRC repays. The return and any payment are due 1 calendar month and 7 days after the end of the VAT period.
Making Tax Digital for VAT has applied to all VAT-registered businesses since April 2022, so every return must be filed through compatible software.
The Flat Rate Scheme
The Flat Rate Scheme simplifies VAT for smaller businesses. You can join if you expect your VAT-taxable turnover in the next 12 months to be £150,000 or less, excluding VAT. You still charge customers VAT at the normal rate, but you pay HMRC a fixed percentage of your VAT-inclusive turnover and normally cannot reclaim input VAT. There is a 1% discount in your first year of VAT registration. The flat rate VAT guide and flat rate VAT calculator cover the sector percentages.
What the calculator does
The VAT calculator adds VAT to a net price or removes it from a gross price at 20%, 5% or 0%. When you only have a VAT-inclusive figure, the reverse VAT calculator works backwards to the net amount and the VAT element. The bulk VAT calculator handles a whole list of figures at once.
For general information only; confirm rates and rules with HMRC or a qualified accountant.
Frequently asked questions
Do I charge VAT if I am not registered?
No. VAT is charged by VAT-registered businesses, and while you are unregistered you cannot normally reclaim the VAT on your own purchases either, which is why some businesses register voluntarily.
What is the difference between zero-rated and exempt?
Both mean the customer pays no VAT. Zero-rated sales are inside the VAT system, so you can reclaim the input VAT on the related costs. Exempt sales are outside it, so you usually cannot.
Do zero-rated sales count towards the £90,000 threshold?
Yes. VAT-taxable turnover includes standard, reduced and zero-rated sales. Exempt sales and the sale of capital assets are left out.
Last reviewed September 2026.