VAT Guide 2026

UK VAT Rate 2026 – Complete Guide

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the United Kingdom. For businesses, freelancers, and anyone pricing products or services for the UK market, understanding the current VAT rates and rules is essential for correct invoicing and compliance with HMRC requirements.

UK VAT Rates in 2026

The UK operates three main VAT rates. The correct rate to apply depends entirely on what is being sold.

Rate	Type	Applies To
20%	Standard	Most goods and services — the default rate for everything not listed below
5%	Reduced	Domestic energy, children's car seats, some mobility aids, certain renovations
0%	Zero-rated	Most food, children's clothing, books, newspapers, public transport, medicines
Exempt	Exempt	Financial services, insurance, education, health services, postage stamps

UK VAT Registration Threshold

Businesses must register for VAT with HMRC when their taxable turnover exceeds GBP 90,000 in any rolling 12-month period. This threshold was increased from GBP 85,000 in April 2024. Voluntary registration is also permitted below the threshold, which can be beneficial for businesses wishing to reclaim VAT on purchases.

How to Calculate UK VAT

Adding 20% VAT to a net price

Multiply the net (ex-VAT) price by 1.20. For example, a consultancy fee of GBP 500 net becomes GBP 600 including VAT. Formula: Gross = Net x 1.20

Removing VAT from a gross price

Divide the gross price by 1.20 to find the net amount. GBP 600 including 20% VAT = GBP 500 net. Formula: Net = Gross / 1.20. The VAT amount is always GBP 100 in this example. Our free VAT calculator does this instantly for any rate.

The VAT fraction method

To find just the VAT element within a gross price at 20%, multiply by 1/6. So GBP 120 x 1/6 = GBP 20 VAT. This is a commonly used shortcut by UK accountants.

Making Tax Digital for VAT

HMRC's Making Tax Digital (MTD) programme requires all VAT-registered businesses to keep digital records and submit VAT returns using MTD-compatible software. This applies to all VAT-registered businesses regardless of turnover. Paper VAT returns are no longer accepted for most businesses.

VAT on UK Invoices

VAT-registered businesses must issue VAT invoices showing the business name and address, VAT registration number, invoice date and number, a description of goods or services, the net amount, the VAT rate and amount, and the gross total. Simplified VAT invoices are permitted for retail sales under GBP 250.

UK VAT Return Filing

VAT returns are typically filed quarterly, with payment due one month and seven days after the end of each VAT period. Returns are submitted digitally through HMRC's MTD system. Late payment attracts interest charges and potential penalties.

Frequently Asked Questions

Has the UK VAT rate changed after Brexit?

The standard UK VAT rate remains 20% and has not changed due to Brexit. However, the UK now sets its own VAT rules independently of the EU, and some rules around cross-border transactions have changed.

Is food zero-rated for VAT in the UK?

Most basic food items are zero-rated (0%). However, catering, restaurant meals, hot takeaway food, alcohol, confectionery, crisps, and some other items are subject to the standard 20% rate.

Can I reclaim VAT on business purchases?

Yes. VAT-registered businesses can reclaim VAT paid on goods and services purchased for business purposes. This is done through your regular VAT return by offsetting input VAT against output VAT.

Do I need to charge VAT to overseas customers?

Generally, VAT is not charged on exports to non-UK customers — they are zero-rated. Sales to EU business customers may be zero-rated with a valid VAT number. The rules depend on whether the supply is of goods or services and the customer's location.