Question 1

What is the current UK VAT rate?

Accepted Answer

The standard UK VAT rate is 20%. This has been the standard rate since 4 January 2011. There is also a reduced rate of 5% that applies to certain goods and services such as domestic fuel and power, children's car seats, and some energy-saving materials. A zero rate (0%) applies to most food, children's clothing, books, and newspapers.

Question 2

How do I add VAT to a price?

Accepted Answer

To add VAT at 20%, multiply the net (ex-VAT) amount by 1.20. For example, if the net price is £100, the gross (inc-VAT) price is £100 x 1.20 = £120. The VAT amount is £20. For the reduced rate of 5%, multiply by 1.05 instead.

Question 3

How do I remove VAT from a price?

Accepted Answer

To remove VAT at 20% from a gross (inc-VAT) price, divide by 1.20. For example, if the gross price is £120, the net price is £120 / 1.20 = £100, and the VAT amount is £20. For the reduced rate of 5%, divide by 1.05.

Question 4

What is the VAT registration threshold?

Accepted Answer

As of April 2024, the VAT registration threshold in the UK is £90,000. If your taxable turnover exceeds this amount in any rolling 12-month period, you must register for VAT with HMRC. You can also register voluntarily if your turnover is below the threshold.

Question 5

What goods and services are exempt from VAT?

Accepted Answer

Some goods and services are exempt from VAT entirely, meaning no VAT is charged and you cannot reclaim VAT on related purchases. Examples include insurance, financial services, education, health services provided by registered practitioners, and the sale or lease of commercial land and buildings (though you can opt to tax these). Exempt supplies are different from zero-rated supplies, where VAT is charged at 0% but you can still reclaim input VAT.

Question 6

What is the difference between zero-rated and exempt?

Accepted Answer

Zero-rated goods and services have VAT charged at 0%, but the supplier can still reclaim VAT on their business costs (input tax). Exempt goods and services have no VAT charged, and the supplier cannot reclaim input VAT. This distinction matters for businesses because it affects how much VAT they can recover. Most food, children's clothing, and books are zero-rated, while financial services and insurance are exempt.

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