UK VAT Rates Explained

Value added Tax is a consumption-based tax that is applied on most of the good and services, it is adapted by 175 countries around the globe. In UK, VAT was introduced in 1973, replacing the purchase tax, which was previously applied on the consumption of goods. The introduction of VAT transformed how businesses were operating in the country. VAT rate was never fixed in the UK as it fluctuated highly since the beginning, initially the VAT rate was 10% but later it was increased in several areas, as for now the VAT rate varies from 8% to 15%. However, VAT rate is even higher on luxury items and on the utilization of petrol, usually 12.5% and 25%.

With the ever-changing VAT rates in the UK, calculating VAT can be a hard nut to crack, yet VAT calculator tools and webpages can initially provide guidance of VAT amount, furthermore for an in-depth VAT calculations and compliance with it, accounting firms UK plays a noteworthy role which is beneficial for VAT compliance and reporting. Here in our article, we will explicate the details of various VAT rates, their methodologies and applications.

A Comprehensive Guide to the VAT in UK

As Previously mentioned, VAT is the basic tax levied on using up services and goods, from the production to selling the product to the customers it is applied and calculated at each stage. It is mandatory for the businesses exceeding the turnover of £90,000 annually to register their company for VAT, HMRC issues a VAT registration certificate with a VAT number and VAT due date, company’s charge VAT to the customers but also pay it on the utilization of products, a portion of that amount can be reclaimed from HM Revenue and Customs (HMRC). VAT has an exert influence on the consumers including the lowered salary ones as it is applied on most of the goods and services either manufactured locally or imported ones sold in the UK.

VAT is applied on the taxable turnover, which is the total value of the entire products liable for VAT, inclusive of the zero-rated products. Smaller entities can calculate their annual VAT using VAT calculator and even if taxable turnover is less than £90,000, they can still Voluntary register themselves to the government for small entity business category to reclaim VAT and a registered firm also put a positive image on the customers.

Three Main VAT Categories In the UK

VAT is split up into 3 distinct types, each with specific VAT percentage, the three categories include,

1.     Standard VAT Rate

The general VAT rate is 20% and adopted on most of the goods and services, including clothing, professional services, furniture, etc. Standard VAT rate can be calculated by adding 20% to the price of services. A VAT calculator can be also used for this purpose.

2.     Reduced VAT Rate

UK government used a low tax system for some of the products to make them affordable for everyone, making them easily accessible for the low salaried consumers as well. This tax rate is 5% and it wraps up the areas of energy savings, sanitary products, and children’s car seats.

3.     Zero VAT Rate

UK government applied 0% VAT to specific categories, it includes books, newspaper, food items, children’s clothes and public transportation services. Zero-rated VAT strategy is helping the lower income households to survive in inflation and poor economic conditions.

Essential Goods and Services Excluded from VAT

Some of the goods and services are exempted from VAT, which states that no VAT will be implemented on specific areas and businesses can also not reclaim VAT or expenses related to it. Some of these areas include,

• Educational institutes
• Insurance Services
• Medical Centres
• Financial Services

The exempt tax is disparate from Zero rate tax, as 0% tax can be reclaimed by the businesses, but no VAT is executed or claimed back in the exempted tax areas.

Can businesses in the UK get a VAT refund?

Businesses may retrieve the VAT in the UK on the goods and services used for business motives. Firstly, the business needs to calculate their VAT using a VAT calculator, they need to differentiate the services and good used solely for business purpose such as,

• Office essential equipment like furniture and hardware.
• Transportation done for business activities
• Expense paid on financial experts and advisors.

However, companies cannot reclaim VAT on items used for self-related purpose and not linked to business directly. Additionally, meals, events and hospitality services assisted by companies are also restricted from VAT reclamation. For the VAT regaining process, companies need to submit quarterly VAT Return, consisting of input VAT which is paid by the business on purchases, and output VAT which is charged by business on sales. This process can be intricate at times and may require qualified experts or accounting firms.

Accounting Firms UK: Offering Strategic VAT Advisory Services

The deep process of VAT tax calculations and fillings needs a thorough knowledge and guidance for accuracy. Accounting firms UK plays a helpful role in the stated areas,

• Prepare and submit VAT returns faultlessly, using proficient tools like Tax Calculators.
• Guiding business related to VAT obligations, managing the claiming back of VAT, zero-rated and exempted areas.
• VAT rules may vary overtime; therefore, a proper check is required to ensure compliance with the latest laws. Expert advisors ensure that businesses stay informed about the continuously changing VAT regulations and provide adherence with these laws.
• In case of any argument or penalties with HRMC, accounting firm speak and support for the business by representing proper legal documentation.
• For VAT exemption businesses, accounting firms helps in guiding the proper methodologies used for Tax calculation.

SS&Co. as your Legal Tax service provider.

Complying with the Tax Laws in UK is multiplex task, which require time and guidance, SSCo Global UK. provides the expertise that is essential to manage VAT effectually, at SS&Co. global we promise to deliver complete observance with the legal norms, by mitigating financial and functional threat. It is vitally important for the companies to hire SS&Co. for a complete VAT related support in areas like VAT registration, handling, filling, and planning and advisory services. Engage our services now and free yourself from VAT concerns, because we got your VAT covered!