Everything you need to know about VAT
Circumstance | Threshold |
|---|---|
VAT registration | More than £90,000 |
Registration for distance selling into the UK | £0 |
Registration for bringing goods into the UK from the EU | More than £90,000 |
Deregistration threshold | Less than £88,000 |
Completing simplified EC Sales List | VAT Registration Threshold plus £25,500 AND supplies of goods to EU of £11,000 or less |
Rate | % of VAT | What the rate applies to |
|---|---|---|
Standard | 20% | Most goods and services |
Reduced rate | 5% | Some goods and services, e.g. children’s car seats and home energy |
Zero rate | 0% | Zero-rated goods and services, e.g. most food and children’s clothes |
Type of business | |
|---|---|
Accountancy or bookkeeping | 14.5 |
Advertising | 11 |
Agricultural services | 11 |
Any other activity not listed elsewhere | 12 |
Architect, civil and structural engineer or surveyor | 14.5 |
Boarding or care of animals | 12 |
Business services not listed elsewhere | 12 |
Catering services including restaurants and takeaways | 12.5 |
Computer and IT consultancy or data processing | 14.5 |
Computer repair services | 10.5 |
Entertainment or journalism | 12.5 |
Estate agency or property management services | 12 |
Farming or agriculture not listed elsewhere | 6.5 |
Film, radio, television or video production | 13 |
Financial services | 13.5 |
Forestry or fishing | 10.5 |
General building or construction services | 9.5 |
Hairdressing or other beauty treatment services | 13 |
Hiring or renting goods | 9.5 |
Hotel or accommodation | 10.5 |
Investigation or security | 12 |
Labour-only building or construction services | 14.5 |
Laundry or dry-cleaning services | 12 |
Lawyers or legal services | 14.5 |
Library, archive, museum or other cultural activity | 9.5 |
Limited cost trader | 16.5 |
Management consultancy | 14 |
Manufacturing fabricated metal products | 10.5 |
Manufacturing food | 9 |
Manufacturing not listed elsewhere | 9.5 |
Manufacturing yarn, textiles or clothing | 9 |
Membership organisation | 8 |
Mining or quarrying | 10 |
Packaging | 9 |
Photography | 11 |
Post offices | 5 |
Printing | 8.5 |
Publishing | 11 |
Pubs | 6.5 |
Real estate activity not listed elsewhere | 14 |
Repairing personal or household goods | 10 |
Repairing vehicles | 8.5 |
Retailing food, confectionary, tobacco, newspapers or children’s clothing | 4 |
Retailing pharmaceuticals, medical goods, cosmetics or toiletries | 8 |
Retailing not listed elsewhere | 7.5 |
Retailing vehicles or fuel | 6.5 |
Secretarial services | 13 |
Social work | 11 |
Sport or recreation | 8.5 |
Transport or storage, including couriers, freight, removals, and taxis | 10 |
Travel agency | 10.5 |
Veterinary medicines | 11 |
Waste or scrap dealing | 10.5 |
Wholesaling agricultural products | 8 |
Wholesaling food | 7.5 |
Wholesaling not listed elsewhere | 8.5 |
Turnover | Client type | VAT options | Benefits | Drawbacks |
|---|---|---|---|---|
Less than £90,000 | Mostly non-VAT registered customers | Don’t register for VAT | You can offer lower prices than VAT-registered competitors, as you do not have to charge the 20% VAT. | You cannot reclaim Input VAT on goods and services because you're not registered. |
Less than £90,000 | Mostly VAT registered customers | Voluntarily register for Standard Rate VAT | VAT-registered customers can reclaim the 20% VAT you charge them, making your prices (excluding VAT) more competitive to them than if you were not VAT registered. You also reclaim all your Input VAT. | None |
From £90,000 to £150,000 | Any | Register for Standard Rate VAT or Flat Rate VAT | If Flat Rate: You only pay HMRC a flat-rate percentage of your gross turnover. | If Flat Rate: You cannot reclaim input VAT, which makes it unsuitable for businesses with high VAT-able expenses. |
£1.35 million | Any | Register for Cash accounting scheme or Annual accounting scheme | If Cash accounting scheme: – Don’t pay or reclaim VAT until actual money changes hands for purchases and sales – Improves cash flow as you only pay VAT once you are paid If Annual accounting scheme: Improves cash flow as you pay VAT less frequently (in monthly or quarterly installments) | If Cash accounting scheme: Delays in reclaiming purchase VAT If Annual accounting scheme: – Can only reclaim input tax once a year, which is damaging if you rely on cash from reclaiming VAT throughout the year |