Blog post

Navigating UK VAT: Understanding the Ins and Outs


September 6, 2023

Value Added Tax (VAT) is a tax that is applied to most goods and services sold in the UK. It is a tax on the value added to goods and services at each stage of production and distribution.

VAT is a complex tax system, and there are many rules and regulations that businesses need to be aware of. 

In this blog post, we provide a brief overview of the ins and outs of UK VAT.

Who is required to register for VAT?

Businesses with a taxable turnover of over £85,000 per year are required to register for VAT. However, there are some businesses that are exempt from VAT registration, such as charities and businesses that sell only exempt or zero-rated goods and services. Businesses under the threshold can register if they wish and often do so due to the additional benefits being registered for VAT brings. This is something we can help advise on. 

What are the different VAT rates?

There are three different VAT rates in the UK: standard rate (20%), reduced rate (5%) and zero rate. The standard rate applies to most goods and services. The reduced rate applies to certain goods and services, such as food and children’s clothing. Zero-rated goods and services are not subject to VAT.

How is VAT calculated?

VAT is calculated on the sale price of goods or services, excluding VAT itself. For example, if a product is sold for £100, the VAT payable is £20 (20% of £100).

How is VAT reclaimed?

Businesses can reclaim the VAT that they have paid on business purchases. To do this, they must submit a VAT return to HM Revenue and Customs (HMRC) every three months.

If you are a business owner, it is important to understand the basics of UK VAT. HMRC has a wealth of information on their website, or why not arrange to speak to one of our advisors who can help you navigate the often complex worlds of VAT?

Here are some additional tips for navigating UK VAT:

  • Keep good records. You need to keep records of all your VAT transactions, including sales, purchases, and VAT reclaims.
  • Get help if you need it. If you are struggling to understand UK VAT, we can help you navigate the rules and regulations.
  • Stay up-to-date with the rules. The VAT rules are constantly changing, so it is important to stay up-to-date.

Want to make sure you understand UK VAT rules and how they apply to you and your business? Get in touch with us to arrange a call to discuss support available.

Laura Blisset Rogers Spencer

Laura Blissett

Laura manages a portfolio of around 150 clients dealing specifically with any bookkeeping requirements including preparation of VAT returns and Management Accounts. Find out more about Laura here.

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