VAT Rates UK 2026/27
Everything you need to know about UK VAT rates, thresholds and how to calculate VAT — updated for the 2026/27 tax year.
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| Rate | Percentage | What it applies to |
|---|---|---|
| Standard rate | 20% | Most goods and services |
| Reduced rate | 5% | Domestic fuel and power, children’s car seats, certain energy-saving materials, mobility aids |
| Zero rate | 0% | Most food, children’s clothing, books, newspapers, public transport, most medications |
| Exempt | N/A | Insurance, financial services, postage stamps, health services, education |
Exempt is not the same as zero-rated. If your supplies are exempt, you cannot register for VAT or reclaim VAT on your purchases. Zero-rated businesses can register and reclaim input VAT.
VAT registration threshold 2026/27
You must register for VAT with HMRC if your taxable turnover exceeds £90,000 in any rolling 12-month period. This is not a calendar year — it is any 12 consecutive months. If you hit the threshold at any point during the year, you must register within 30 days.
The deregistration threshold is £88,000. If your taxable turnover falls below this figure, you can apply to deregister.
The registration threshold was raised from £85,000 to £90,000 in April 2024. If you were previously below the old threshold, double-check whether your turnover now exceeds the new figure before assuming you are still exempt from registration.
You can register voluntarily below the £90,000 threshold. This makes sense if your customers are VAT-registered businesses (they can reclaim the VAT you charge) or if you want to reclaim VAT on significant business purchases.
How to calculate VAT
Adding VAT to a price (net to gross)
Multiply the net price by 1.20 for the standard rate, or 1.05 for the reduced rate.
Example: £500 net × 1.20 = £600 gross (£100 VAT)
Removing VAT from a price (gross to net)
Divide the gross price by 1.20 for the standard rate, or 1.05 for the reduced rate.
Example: £1,200 gross ÷ 1.20 = £1,000 net (£200 VAT)
A common mistake is to subtract 20% directly from the gross price. This gives the wrong answer. £1,200 × 0.80 = £960 — this is incorrect. The correct method is £1,200 ÷ 1.20 = £1,000.
Our VAT calculator handles both calculations instantly — including the flat rate scheme. Try the VAT calculator →
The VAT Flat Rate Scheme
The Flat Rate Scheme (FRS) is an HMRC simplification for small businesses with taxable turnover under £150,000. Instead of accounting for VAT on every transaction, you pay a single fixed percentage of your gross turnover to HMRC.
You still charge customers the standard 20% VAT rate. The difference between what you collect and what you pay to HMRC is yours to keep.
Flat rates vary by industry — from 4% for retailers of food and children’s clothing to 16.5% for limited cost traders. A limited cost trader is a business whose goods cost less than 2% of their VAT-inclusive turnover or less than £1,000 per year.
Example: IT consultant, £80,000 gross annual turnover
VAT charged to clients at 20%: £16,000
Flat rate paid to HMRC at 14.5%: £11,600
You keep the difference: £4,400
Whether the Flat Rate Scheme saves you money depends on your industry rate and how much VAT you pay on purchases. It is worth calculating both ways before deciding.
Our flat rate scheme calculator shows exactly how much you would keep for your industry. Calculate your flat rate saving →
Making Tax Digital for VAT
Making Tax Digital (MTD) for VAT requires all VAT-registered businesses to keep digital records and submit VAT returns using MTD-compatible software. This has applied to all VAT-registered businesses since April 2022, regardless of turnover.
If you are VAT-registered, you must use software that connects directly to HMRC — you can no longer submit VAT returns manually through the HMRC portal.
VAT on expenses as a freelancer
If you are VAT-registered, you can reclaim the VAT you pay on business purchases — this is called input tax. Common reclaimable expenses for freelancers include software subscriptions, equipment, professional services, and business travel costs that have VAT charged on them.
You cannot reclaim VAT on:
- Business entertainment
- Cars (in most circumstances)
- Anything used for personal as well as business purposes — only the business proportion can be reclaimed
Frequently asked questions
What is the standard VAT rate in the UK?
The standard UK VAT rate is 20%. This applies to most goods and services. A reduced rate of 5% applies to certain goods including domestic fuel and power. Some goods and services are zero-rated at 0%.
When do I have to register for VAT?
You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period (2026/27 threshold). You have 30 days to register once you exceed the threshold. You can also register voluntarily below the threshold.
What is the difference between zero-rated and exempt?
Zero-rated goods are still VAT taxable — the rate is simply 0%. If you sell zero-rated goods you can register for VAT and reclaim input tax on your purchases. Exempt supplies fall outside the VAT system entirely. You cannot register for VAT if you only make exempt supplies, and you cannot reclaim input tax.
Has the VAT threshold changed recently?
Yes. The VAT registration threshold increased from £85,000 to £90,000 in April 2024. The deregistration threshold also increased from £83,000 to £88,000 at the same time.
What is the VAT Flat Rate Scheme?
The Flat Rate Scheme lets eligible small businesses pay a single fixed percentage of gross turnover as VAT rather than accounting for VAT on each transaction. Rates vary by industry from 4% to 16.5%. You must have taxable turnover under £150,000 to join the scheme.
Do I charge VAT on invoices if I am not VAT registered?
No. You must not charge VAT on your invoices if you are not VAT registered. Only VAT-registered businesses are permitted to charge VAT. Charging VAT without being registered is a criminal offence.
This guide is for general information only and does not constitute tax advice. VAT rules are complex and your circumstances may vary. Always verify current rates and thresholds at gov.uk or consult a qualified accountant.