Short, clear answers to the VAT questions people ask most. For more detail on any topic, follow the links to the full guides.
VAT rates
What is the UK VAT rate? The standard rate is 20%. A reduced rate of 5% and a zero rate of 0% apply to some goods and services.
What is charged at 5% VAT? Home gas and electricity, children’s car seats, mobility aids for older people and smoking cessation products.
What is zero rated? Most food, books, newspapers, children’s clothes and shoes, prescription medicines and public transport.
What is the difference between zero rated and exempt? Zero rated sales stay inside the VAT system, so the business can reclaim VAT on costs. Exempt sales sit outside it, so the business usually cannot.
Calculating VAT
How do I add VAT? Multiply the net price by 1.2 at the standard rate, or by 1.05 at the reduced rate.
How do I remove VAT? Divide the gross price by 1.2 at the standard rate. Do not subtract 20%, as that gives the wrong figure.
How much VAT is in a price at 20%? The VAT is one sixth of the gross price. A £120 price holds £20 of VAT.
What is the difference between net and gross? Net is the price before VAT. Gross is the price after VAT.
Registration
When do I have to register for VAT? Once your taxable turnover passes £90,000 in any rolling 12 month period, or when you expect to pass it in the next 30 days alone.
What is the VAT threshold? £90,000 for registration. The deregistration threshold is £88,000.
Can I register for VAT voluntarily? Yes. You can register below £90,000, for example to reclaim VAT on costs.
How long does registration take? HMRC usually sends your VAT number within a few working days.
Invoices and records
What must a VAT invoice show? Your VAT number, a unique invoice number, the date, the customer details, a description, the VAT rate, the net amount, the VAT amount and the total.
Is a receipt a valid VAT invoice? For sales up to £250 a receipt with the right details can count. Above £250 you need a full VAT invoice.
How long must I keep VAT records? Six years.
Returns and payment
How often do I file a VAT return? Most businesses file every three months, through Making Tax Digital.
When is a VAT return due? One calendar month and seven days after the end of the VAT period.
What if I cannot pay my VAT bill? File on time, then contact HMRC to arrange a time to pay plan.
Schemes
What is the Flat Rate Scheme? A simpler scheme where you pay a fixed percentage of turnover instead of working out VAT on every sale and purchase.
What is the Cash Accounting Scheme? A scheme where you pay VAT when customers pay you and reclaim VAT when you pay suppliers.
What is the construction reverse charge? A rule where the customer accounts for the VAT on building work instead of the supplier, for CIS services between VAT registered businesses.