What vat applies in the UK

VAT (value-added tax), or tax on goods and services (PTU), is a tax on added value, i.e. on the increase in the value of goods as a result of the production process or the creation of services.

VAT (value-added tax), or tax on goods and services (PTU), is a tax on added value, i.e. on the increase in the value of goods as a result of the production process or the creation of services. VAT is an indirect tax, levied at each successive stage of trade in goods or services. VAT applies to both sellers and buyers of goods and services as its value is added to the net value of the transaction.

VAT rates in Great Britain

VAT has been in force in the UK since 1973, when the UK joined the European Union. Britain leaves the European Union at the end of 2020 >> Brexit guide

The standard rate of VAT in the UK is 20% and covers all products and services not covered by the reduced rates of 5% and 0%.

VAT rate Designated goods or services

20% All goods or services other than those indicated below

5% Some social housing, Some social services, Specific energy-efficient home installations and goods, Specific repairs to private dwellings, Specific medical equipment for the disabled, Supplies of electricity, natural gas and district heating for domestic use,

LPG and home heating oil, Child car seats

0% Some social housing, Printed books, Newspapers, Magazines, Domestic waste collections, Household water supply (except distilled and mineral water), Food and drink supplies, Takeaway food, Prescription pharmaceuticals, Specific medical supplies for the disabled, Childrens clothing and footwear, Childrens nappies, Live animals for human consumption, Seed supplies, Cut flowers, Food Plants, Animal Feed Supply, House Caravan Supply, House Boat Supply, Specific New Build Construction, Sewerage Services, Intra-Community and International Passenger Transport, Domestic Passenger Transport, Motorcycles, Bicycle Helmets, Commercial Vessels and Aircraft, Refurbishment of private dwellings in the Isle of Man

Interestingly, while zero VAT is charged on unprocessed food (not stimulants), standard VAT – 20% – is paid on ready meals purchased even in a supermarket.

Similarly, it can be surprising to see childrens clothing at zero percent and adult or “big” teen clothing at 20 percent.

Sometimes the rate of VAT is determined by the purpose of the product and so, for example, electricity and gas for household use are subject to a reduced rate of 5%, while for business/industry use – the standard rate of 20%.

Below are some examples of groups of goods that are not subject to 20% tax

Standard rate of VAT in the UK

The standard rate of VAT – 20% – covers most products and services you use as an individual or business. Curious about what exactly is on that list? This includes sodas and alcoholic drinks, most sweets like chocolate, candy bars, electrical appliances, takeaway meals and drinks, and restaurant meals.