Value added tax

Reg­is­tered busi­ness­es charge Val­ue Added Tax (VAT) on their sales. This is known as out­put VAT and the sales are referred to as out­puts.

Sim­i­lar­ly VAT is charged on most goods and ser­vices pur­chased by the busi­ness. This is known as input VAT.

There are three rates: stan­dard which applies to most goods and ser­vices, reduced rate for some goods and ser­vices such as home ener­gy and zero rate goods and ser­vices, for exam­ple, most food and chil­dren’s clothes.

Some sup­plies are exempt from VAT for exam­ple postage stamps, finan­cial and insur­ance trans­ac­tions.

A busi­ness is required to reg­is­ter for VAT if the val­ue of tax­able sup­plies exceeds the annu­al reg­is­tra­tion lim­it.

Rates

Stan­dard: 20%

Reduced: 5%

Limits

Annu­al Reg­is­tra­tion Lim­it (1.4.26 to 31.3.27): £90,000

Annu­al Dereg­is­tra­tion Lim­it (1.4.26 to 31.3.27): £88,000