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Home : Tax Guide : VAT Guide

The VAT is an acronym for Value Added Tax. It is a sales tax that is added to goods and services in the UK. When you sell something, you are responsible for collecting the tax and sending it in to the government.

1. What is the percentage charged with the VAT?
The current percentage charged in a value added tax is 17.5%.

2. Are there any goods with a reduced VAT?
There are some goods that carry a reduced percentage for VAT, such as children's car seats, which are taxed at 5%. This also applies to fuel.

3. Are there any goods and services that are exempt from VAT?

The items that are exempt from VAT include:

  • Food
  • Children's clothing
  • Books, newspapers, magazines
  • Equipment for people with disabilities

4. How is VAT calculated?
The percentage of 17.5% or 5% is multiplied by the price of the item and this amount is added to the price.

5.Do all businesses have to charge VAT?
No. Any business that has less than 60,000 pound per year does not have to charge VAT.

6. Who pays the VAT to the government?
Consumers pay the VAT to the business when they make their purchases. The business then has to send this money to Customs and Excise. Most businesses are required to send in the payments on a quarterly basis, but small businesses can opt to make one annual payment instead.

7. What about the Tax businesses pay for their supplies?
Businesses also pay the VAT when they purchase equipment and supplies. When they do a self-assessment to determine how much VAT they have to send in to Customs and Excise, they deduct the total amount they paid out from what they collected. If they collected more VAT, then they have to remit a payment. If however, the amount of VAT they paid out, they will receive a refund.

[Back to UK Tax Guide]

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