What is VAT and how much is it in 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
|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%|
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 template 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.