How vat / sales tax works in United Kingdom
UK VAT applies at 20% to most goods and services supplied in the UK by a taxable person in the course of business, with imports and many digital supplies also in scope.
A 5% reduced rate covers domestic fuel and power, children's car seats, and qualifying mobility aids, while zero-rating at 0% covers most food, books, children's clothes, and exports, with input VAT still recoverable.
UK-established businesses must register once taxable turnover passes GBP 90,000 in twelve months, then file digital VAT returns and pay under Making Tax Digital rules.
Tax rates at a glance
- Standard VAT
- 20%
- Reduced VAT
- 5%
- Zero rate
- 0%
- Exempt supplies
- No VAT
- Registration threshold
- GBP 90,000
- Deregistration threshold
- GBP 88,000
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersFreelancersFoundersExpatsCross-border traders
Watch out for
- Zero-rated and exempt look identical on a customer invoice but behave oppositely behind the scenes: zero-rating preserves input VAT claims while exemption restricts them.
- Northern Ireland keeps special EU-aligned VAT treatment for goods under the Windsor Framework, so GB and NI supply chains need separate checks.
- Non-UK businesses generally face registration from the first taxable UK sale, with no GBP 90,000 shelter, which catches many overseas sellers by surprise.
- Private school fees moved into standard-rated 20% VAT from January 2025, a reminder that politically sensitive categories can change at short notice.
Frequently asked questions
What is the UK VAT rate?
The standard UK VAT rate is 20% in 2026. A 5% reduced rate covers items such as domestic energy and children's car seats, while many essentials are zero-rated at 0%.
When must a UK business register for VAT?
A UK-established business must register once taxable turnover exceeds GBP 90,000 in a rolling twelve months. Voluntary registration below that is allowed if reclaiming input VAT outweighs the admin.
What is the difference between zero-rated and exempt?
Zero-rated supplies are taxable at 0%, so input VAT can still be reclaimed. Exempt supplies sit outside the VAT charge, which generally blocks related input VAT recovery.