What is Value Added Tax and how much is VAT in the UK?
| Reduced-rate items | Zero-rated items | VAT exempt items |
|---|---|---|
| Children's car seats | Children's clothing and shoes, public transport | Betting and gaming |
| Women's sanitary products | Books and newspapers | Subscriptions to membership organisations |
| Residential conversions | Food - except meals in restaurants | Fundraising events by charities |
| Installation of energy-saving materials | Most goods you export to a country outside the UK | Some education and training |
| Domestic fuel and power | Motorcycle helmets | Providing credit and Insurance |
The standard rate of VAT in the UK was increased from 17.5% to 20% on 4 January
2011.
The reduced rate of 5% is applied to some goods and services such as children’s
car seats and home energy.
Zero VAT rate is applied to a range of products and services to do with health,
publishing and kids’ clothing.
UK VAT rates history
| Date | VAT changes |
|---|---|
| 1st April 1973 | 10% Value Added Tax has been introduced in the UK |
| 29th July 1974 | VAT rate reduced to 8% but 25% fuel tax introduced |
| 18th June 1979 | Value Added Tax rate increased to 15% |
| 1st April 1991 | The VAT rate has been increased to 17.5% |
| 1st December 2008 | Standard sales tax rate reduced by 15% |
| 1st January 2010 | The standard rate was increased to 17.5% and a reduced rate of 7% was introduced |
| 4th January 2011 | The standard VAT rate is increased to current 20% and the reduced rate is set at 5% |
VAT Rates in Europe
| Country | Standard VAT Rates | Reduced VAT Rates |
|---|---|---|
| Austria | 20% | 10%, 13%, 19% |
| Belgium | 21% | 12%, 6% |
| Bulgaria | 20% | 9% |
| Croatia | 25% | 13%, 5% |
| Cyprus | 19% | 5%, 9% |
| Czech Republic | 21% | 15%, 10% |
| Denmark | 25% | - |
| Estonia | 20% | 9% |
| Finland | 24% | 14%, 10% |
| France | 20% | 5.5%, 2.1% |
| Germany | 19% | 7%, 5.5% |
| Greece | 24% | 13% |
| Hungary | 27% | 5%, 12%, 7%, 18% |
| Ireland | 23% | 13.5%, 4.8%, 9% |
| Italy | 22% | 4%, 5%, 10% |
| Latvia | 21% | 12% |
| Lithuania | 21% | 9%, 5% |
| Luxembourg | 17% | 14%, 3%, 8% |
| Malta | 18% | 5%, 7% |
| Monaco | 20% | 5.5%, 10%, 2.1% |
| Netherlands | 21% | 9% |
| Poland | 23% | 8%, 5% |
| Portugal | 23% | 6%, 13% |
| Romania | 19% | 9%, 5% |
| Slovakia | 20% | 10%, 6% |
| Slovenia | 22% | 9.5%, 5% |
| Spain | 21% | 10%, 4% |
| Sweden | 25% | 12%, 6% |
Working Out VAT
Adding VAT Formula
If you want to add VAT to the price, to divide the amount by 100 and then multiply by
(100 + VAT percentage). That's all, you got the amount including VAT (Gross). To make sure you get
it
right, better use our calculator.
VAT Addition Example
For example, if your business sells sports equipment for £500
- First, you need to divide the amount by 100 per cent
- Then multiply this value by 120 per cent
- After the calculation, we get £600, which is the price including VAT
Removing VAT Formula
If you want to remove VAT from the price, to divide the amount by (100 + VAT
percentage) and then multiply by 100. Now you know the amount exclusive of VAT (Net). If this is
difficult
for you, use our calculator.
VAT Subtraction Example
For example, if you bought a laptop for a Gross price £500
- First, you need to divide the price by 120 per cent
- Then multiply the value obtained by 100 per cent
- We get £416.67, which is the price excluding VAT
Calculate VAT in Excel
If you need to calculate VAT for several goods at once, it is easier to use Excel
than a calculator. I created a Excel spreadsheet for reverse VAT calculation – download, it's
free.
Frequently Asked VAT Questions & Answers
What are the current VAT rates in the UK?
Rates vary according to what you’re supplying, and there are four main categories to
think about: standard rate, reduce rate, zero-rated and exempt supplies. Rates are subject to change and
you must apply changes from the date they change read more..
How to check the validity of the company VAT number?
To verify the validity of the VAT number you can use the official services. For UK
companies there is an UK VAT number checker. If you need to check the VAT number of a European company,
try
VIES
VAT number validation.
What is the flat rate scheme?
The Flat Rate Scheme is open to businesses with a turnover of less than £ 150 000,
and it’s designed to simplify the VAT process – particularly for freelancers, contractors and small
businesses. You have to make sure you apply to HMRC to sign up for it read more..
Do I really need to register for VAT?
Well, that depends on your particular circumstances. If your turnover in a 12-month
period reaches the current £85,000 threshold, then registration is compulsory – and if you don’t do it,
you’ll receive a fine as a penalty. If you don’t hit this figure, then registration isn’t obligatory read
more..
6 Interesting VAT Facts
VAT was first introduced in France in 1954. The UK VAT rate was originally set at 10% and gradually increased over time, rising to 20% in 2011, and has remained so ever since.
In the 2019/2020 tax year, the UK generated £129.88 billion in VAT revenue. VAT is the third largest source of government revenue after income tax and National Insurance.
Hungary has the highest VAT rate in the world at 27%, followed by Iceland with
25.5%. Countries that don't charge VAT at all include the Bahamas, Hong Kong, Saudi Arabia and
Qatar.
Brands that have fought and won VAT victories include Jaffa Cakes and Tunnocks Snowballs, which have successfully proven that their products are cakes (VAT-free) and not cookies, which in turn are subject to VAT.
The highlight for the media was the emergence of Pastygate in 2012. The government's proposal to start charging VAT on takeout items such as hot sausage rolls and pastries met with widespread disapproval.
Goods with a zero rate of VAT in the UK include: children's clothing, most
foodstuffs, books and prescription drugs. Other items not subject to VAT include visits to museums,
antiques and postal services.
Calculators for Small Business
Income Tax Calculator
If you’re self-employed, it can sometimes be difficult to work out exactly what your take-home pay is once you’ve covered all of your business costs.
Self Assessment Tax Calculator
Whether you’re employed, self-employed or a combination of both, working out your take home pay after tax can be tricky.
Corporation Tax Calculator
Use this calculator to find out how much corporation tax your limited company
will be liable for, which is based on your net profit before taxes.
Umbrella Tax Calculator
Our take-home pay calculator gives a rough estimate of what your potential salary might look like if you work through an umbrella company.
PAYE Calculator
Use this calculator to calculate your take home pay as well as contributions to PAYE and NI, determined by your annual gross salary.
Mortgage Calculator
A mortgage is one of the biggest commitments you make in your financial life.
Our
mortgage calculator can help you to know how much they will cost you.
Pension Calculator
How much do you need in retirement and how much will you have? Our pension calculator will help you answer these questions.
IR35 Tax Calculator
IR35 calculator have become an easy way to find an instant figure of your earnings depending on your situation.
Dividend Tax Calculator
Find out how much income tax you have to pay based on your current salary and
annual dividends with this calculator.
Related VAT Guides
VAT Accounting schemes
You will learn about the 3 most popular schemes: cash accounting scheme, flat
rate scheme, annual accounting scheme. Watch webinar about VAT accounting
schemes.
How to do your VAT Return
This webinar is about: how and when to send your VAT Return, useful tips on
how
to complete a VAT Return. Watch how to do your
VAT
Return.
VAT Flat Rate Scheme
You will learn about: what the Flat Rate Scheme is, how to keep VAT records,
how to fill in your VAT Return. Watch video about the VAT Flat Rate
Scheme
Contractors’ guide to VAT
There are several VAT schemes contractors can register to: the standard rate VAT scheme, VAT flat rate scheme, annual accounting VAT scheme and cash accounting scheme.
HMRC VAT Inspection
VAT officers can visit your business to inspect your VAT records and make sure you’re paying or reclaiming the right amount of VAT.
Filing a Late VAT Return
If you submit a late return, you will not have to pay a surcharge if you: pay your VAT in full by the deadline, have no tax to pay, are due a VAT repayment.
Vatulator is a quick and efficient tool for calculating how much money you pay for a certain product. Sadly, the only region it can be useful in is the United Kingdom. I wrote a full review here https://www.softpedia.com/get/Others/Finances-Business/VATulator.shtml