TL;DR
UK VAT rates in 2026/27: standard rate 20% on most goods and services, reduced rate 5% on domestic energy and certain essentials, zero rate 0% on food, books and children clothing. The VAT registration threshold is 90,000 pounds per year. Businesses must register within 30 days of exceeding the threshold.
Last reviewed: 23 June 2026
Key Facts: UK VAT Rates 2026/27
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UK VAT rates explained
Value Added Tax (VAT) is a consumption tax collected by HMRC through VAT-registered businesses at each stage of the supply chain. The business acts as a collector - charging VAT on sales (output tax), reclaiming VAT paid on purchases (input tax), and paying the difference to HMRC quarterly.
There are four VAT categories in the UK. The category is determined by the type of good or service, not by who is buying or selling it.
UK VAT Rates 2026/27: What Falls in Each Category
| Rate | Description | Examples |
|---|---|---|
| 20% Standard | Default rate - applies unless explicitly listed otherwise | Electronics, clothing (adult), alcohol, restaurant meals, professional services, vehicles |
| 5% Reduced | Specific essentials and socially beneficial goods | Domestic gas and electricity, children car seats, energy-saving home installations, nicotine replacement products, mobility aids for elderly |
| 0% Zero-rated | Taxable at 0% - businesses can still reclaim input VAT | Most food and drink (not restaurant), books and newspapers, children clothing, prescription medicines, exports outside UK, most public transport |
| Exempt | Outside VAT system - no VAT charged, input VAT not reclaimable | Financial services, insurance, education, health services, most property transactions, postal services (Royal Mail) |
| Outside scope | Not part of VAT system at all | Wages, dividends, statutory fees, charitable donations |
Source: HMRC VAT rates (GOV.UK). Specific items can change - verify with HMRC guidance.
The difference between zero-rated and exempt
This distinction is critical for businesses. Zero-rated goods are technically taxable at 0%. A business selling zero-rated goods is still a VAT-registered business that can reclaim the VAT it paid on its own purchases (input VAT). A bakery selling bread (zero-rated) can still reclaim VAT on its commercial ovens.
Exempt supplies are completely outside the VAT system. A business making only exempt supplies cannot register for VAT and cannot reclaim input VAT. An insurance company cannot reclaim the VAT it pays on its office supplies. Where a business makes both taxable and exempt supplies, it can only reclaim input VAT proportionally.
VAT registration threshold
Businesses must register for VAT when their taxable turnover (the total value of VAT-taxable sales, including zero-rated sales) exceeds 90,000 pounds in any rolling 12-month period. This is not a calendar year - HMRC looks at any consecutive 12 months.
There is also a forward-looking test: if at any point a business has reasonable grounds to believe its taxable supplies will exceed 90,000 pounds in the next 30 days alone, it must register immediately. Failing to register on time allows HMRC to backdate the registration and hold the business liable for VAT it never collected from customers.
VAT Schemes for Smaller Businesses
| Scheme | Who Can Use It | How It Works | Key Benefit |
|---|---|---|---|
| Flat Rate Scheme | Turnover under 150,000 pounds | Pay a fixed % of gross turnover to HMRC | Simplified bookkeeping |
| Cash Accounting | Turnover under 1.35 million pounds | Pay VAT when customer pays, reclaim when supplier is paid | Helps cash flow |
| Annual Accounting | Turnover under 1.35 million pounds | One VAT return per year, advance payments monthly or quarterly | Reduces admin burden |
Source: HMRC VAT schemes for small businesses (GOV.UK).
VAT returns and payment deadlines
Most VAT-registered businesses submit quarterly returns. The return and payment are due one calendar month and seven days after the end of the VAT period. For a quarter ending 31 March, the deadline is 7 May. All VAT-registered businesses must now use Making Tax Digital (MTD) for VAT, keeping digital records and submitting returns through MTD-compatible software.
What is the standard UK VAT rate?
The standard UK VAT rate is 20%. It has been at this level since January 2011 and applies to the majority of goods and services sold in the UK unless a specific reduced, zero or exempt category applies.
What is the VAT registration threshold in 2026?
The VAT registration threshold is 90,000 pounds of taxable turnover in any rolling 12-month period. Businesses must register within 30 days of exceeding this threshold. Voluntary registration is possible below this threshold.
What is the difference between VAT-exempt and zero-rated?
Zero-rated supplies carry 0% VAT but remain within the VAT system - businesses can still reclaim input VAT on their costs. Exempt supplies are outside the VAT system - businesses making only exempt supplies cannot register for VAT and cannot reclaim input VAT.
Is domestic gas and electricity zero-rated or 5%?
Domestic gas and electricity are charged at the reduced rate of 5%, not zero-rated. This applies to energy for household use. Business energy is charged at the standard rate of 20%.
When must a business pay VAT?
VAT returns and payments are normally due one calendar month and seven days after the end of each VAT accounting period. Most businesses account quarterly. Late submission incurs penalty points, and late payment attracts a financial penalty and interest at the Bank of England base rate plus 4%.
What is the Flat Rate VAT Scheme?
The Flat Rate Scheme allows businesses with taxable turnover up to 150,000 pounds to pay a fixed percentage of their gross turnover to HMRC instead of calculating input and output VAT on every transaction. The percentage varies by industry. Businesses still charge customers the full 20% VAT but keep the difference between what they collect and the flat rate they pay.
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