UK VAT rates

Standard (20%): Most goods and services Reduced (5%): Home energy, children's car seats, mobility aids, some renovation work Zero (0%): Food (most), children's clothing, books, newspapers, public transport Exempt: Financial services, insurance, medical services, private education

Registration threshold

You must register for VAT when your taxable turnover exceeds £90,000 in a rolling 12-month period (2024-25 threshold). You can voluntarily register below this threshold — useful if your customers are VAT-registered businesses who can reclaim your VAT.

Making Tax Digital (MTD) for VAT

All VAT-registered businesses must keep digital records and submit VAT returns using MTD-compatible software. HMRC's free bridging software links spreadsheets to MTD. Quarterly returns via software, not manual portal entry.

Common VAT mistakes

  1. Not registering when turnover crosses the threshold (penalties apply)
  2. Reclaiming VAT on entertainment (HMRC restricts this)
  3. Not applying reverse charge on services bought from outside the UK
  4. Treating exempt supplies as zero-rated (they're not the same — zero-rated allows input VAT recovery, exempt doesn't)