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UK Tax Guide — April 2026
VAT (Value Added Tax) is a consumption tax added to most goods and services sold in the UK. Businesses registered for VAT charge it to their customers collect it and pay it to HMRC. As a consumer you pay VAT as part of the price of most things you buy.
UK VAT Rates 2026
Rate
Percentage
What It Applies To
Standard rate
20%
Most goods and services — default rate
Reduced rate
5%
Energy saving materials children's car seats
Zero rate
0%
Food most children's clothing books newspapers
Exempt
N/A
Financial services insurance education healthcare
The VAT Registration Threshold 2026
Businesses must register for VAT when their taxable turnover exceeds £90,000 in any rolling 12-month period. This threshold has been frozen since 2017. Once registered you must charge VAT to customers and submit quarterly VAT returns.
How VAT Works — A Simple Example
Stage
Price
VAT at 20%
Total
Manufacturer sells to wholesaler
£100
£20
£120
Wholesaler sells to retailer
£150
£30
£180
Retailer sells to consumer
£200
£40
£240
Consumer pays
—
—
£240
Each business in the chain only pays VAT on the value they add — they reclaim the VAT they paid on purchases and pay the difference to HMRC. The final consumer bears the full cost.
Do I Need to Register for VAT?
You must register if turnover exceeds £90,000 in 12 months
You can register voluntarily below the threshold — useful if you have VAT-registered customers
Once registered you must charge VAT issue VAT invoices and submit quarterly returns
You can reclaim VAT on business purchases — significant saving for B2B businesses
VAT Schemes for Small Businesses
Scheme
Best For
Benefit
Flat Rate Scheme
Businesses with low VAT on purchases
Pay fixed % of turnover — simpler accounting
Cash Accounting
Businesses with slow-paying customers
Pay VAT when you receive payment not when invoiced
Annual Accounting
Those wanting to reduce admin
One VAT return per year instead of four
Bottom line: If your turnover is approaching £90,000 register for VAT now — being caught unregistered means paying backdated VAT yourself. The Flat Rate Scheme can save small businesses significant money if your actual VAT rate is lower than your flat rate percentage. Always get accountancy advice before registering.
The content on Kaeltripton.com is for informational and educational purposes only and does not constitute financial, investment, tax, legal or regulatory advice. Kaeltripton.com is not authorised or regulated by the Financial Conduct Authority (FCA) and is not a financial adviser, mortgage broker, insurance intermediary or investment firm. Nothing on this site should be construed as a personal recommendation. Rates, figures and product details are indicative only, subject to change without notice, and should always be verified directly with the relevant provider, HMRC, the FCA register, the Bank of England, Ofgem or other appropriate authority before any financial decision is made. Past performance is not a reliable indicator of future results. If you require regulated financial advice, please consult a qualified adviser authorised by the FCA.
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Chandraketu Tripathi
Finance Editor · Kaeltripton.com
Chandraketu (CK) Tripathi, founder and lead editor of Kael Tripton. 22 years in finance and marketing across 23 markets. Writes on UK personal finance, tax, mortgages, insurance, energy, and investing. Sources: HMRC, FCA, Ofgem, BoE, ONS.
