Question 1

What is the UK VAT rate in 2026?

Accepted Answer

The standard rate is 20%, unchanged since January 2011. The reduced rate of 5% applies to domestic energy, children's car seats, sanitary products, and a limited number of other goods. Zero-rated items (0%) include most food, children's clothing, books, and public transport. There is no indication that any of these rates will change in the current Parliament.

Question 2

How do I calculate VAT from a gross (VAT-inclusive) amount?

Accepted Answer

Divide the gross amount by 1.20 for the standard 20% rate. The result is the net amount. The VAT is the difference between gross and net. Do not subtract 20% from the gross — that gives the wrong answer.

Question 3

What is the VAT registration threshold for 2026?

Accepted Answer

The threshold is £90,000 of taxable turnover in any rolling 12-month period. This was confirmed in the April 2024 Budget and remains unchanged for 2026/27. The deregistration threshold is £88,000. Businesses based outside the UK face a zero threshold — they must register from their very first taxable UK sale.

Question 4

Is VAT charged on services sold to overseas customers?

Accepted Answer

For B2B services, the general rule is that the place of supply follows the customer's location. A UK business selling consulting services to a German company is outside the scope of UK VAT — no UK VAT is charged, and the supply doesn't appear on your UK return. For B2C digital services to EU consumers, you charge VAT at the customer's country rate using the EU One-Stop Shop (OSS) scheme. Always check the specific rules for your service type, as there are several exceptions.

Question 5

Can I reclaim VAT on purchases made before I registered?

Accepted Answer

Yes, within HMRC's limits. Goods (still held at registration): up to 4 years before registration. Services: up to 6 months before registration. You cannot reclaim VAT on goods bought specifically for resale that have already been sold, or on goods consumed entirely before registration.

Question 6

What is the difference between VAT exempt and zero-rated?

Accepted Answer

Both result in the customer paying no VAT, but they work differently for the business. Zero-rated (0%): VAT charged to customer — None, counts toward £90k threshold — Yes, input VAT recoverable on related costs — Yes, appears on VAT return — Yes. Exempt: VAT charged to customer — None, counts toward £90k threshold — No, input VAT recoverable on related costs — No, appears on VAT return — No.

Question 7

How do I work out 20% VAT using a basic calculator?

Accepted Answer

Add 20% VAT to net price: Net × 1.2. VAT amount on a net price: Net × 0.2. Remove VAT from gross price: Gross ÷ 1.2. VAT amount within a gross price: Gross ÷ 6.

Question 8

What is the VAT Flat Rate Scheme and is it worth it?

Accepted Answer

The Flat Rate Scheme lets businesses pay a fixed percentage of gross turnover to HMRC rather than tracking each transaction's input and output VAT. It can produce a small cash benefit for service businesses with low goods costs and a sector rate comfortably below 16%. However, if your goods spending is very low (under 2% of turnover or £1,000 per quarter), you'll be classified as a limited cost trader and must apply the 16.5% rate — at which point the scheme rarely saves money. Eligibility requires VAT-taxable turnover of £150,000 or less.

Question 9

What happens if I charge VAT when I'm not registered?

Accepted Answer

Charging VAT when you're not VAT-registered is a criminal offence under the VAT Act 1994. HMRC can require you to repay every penny of VAT you incorrectly charged, and you face a fine of up to £400 per invoice, plus potential prosecution in serious cases. If you're approaching the threshold, always register on time rather than continuing to charge without registration.

Disclaimer

1. General Information Only

2. Not a Substitute for Professional Advice

3. Calculator Results — Accuracy & Limitations

4. Accuracy of Information

5. No HMRC Affiliation

6. Flat Rate Scheme Figures

7. External Links

8. Making Tax Digital (MTD) Compliance

9. Limitation of Liability

10. Changes to This Disclaimer

11. Contact