Value Added Tax (VAT) is a tax charged on many goods and services in the UK.
There are three main VAT rates:
- Standard rate (20%)
- Reduced rate (5%)
- Zero rate (0%)
Some goods and services are also exempt from VAT, meaning VAT is not charged.
Examples of reduced-rate and zero-rated supplies can be found in HMRC’s guidance, although the VAT treatment of some goods and services can be complex.
In most shops and online stores, prices shown to consumers already include VAT. However, quotes from businesses such as tradespeople or garages may sometimes be shown excluding VAT.
For example, if a quote is £100 excluding VAT, the total amount payable at the standard VAT rate would be:
£100 + £20 VAT = £120 (or £100 × 1.2 = £120).
Not all businesses charge VAT. Businesses whose VAT taxable turnover exceeds the VAT registration threshold may be required to register for VAT. Some businesses choose to register voluntarily.
VAT-registered businesses generally pay HMRC the difference between:
- VAT charged on sales (output VAT), and
- VAT paid on eligible purchases and expenses (input VAT).
You can use our online VAT Calculator to calculate VAT amounts quickly and accurately.
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