Charge, reclaim and record VAT
All VAT-registered businesses should now be signed up for Making Tax Digital for VAT. You no longer need to sign up yourself.
As a VAT-registered business, you must charge VAT on the goods and services you sell unless they are exempt.
You must register for VAT to start charging VAT.
This guide is also available in Welsh (Cymraeg).
How to charge VAT
When you sell goods or services, you must do the following:
- work out the VAT-inclusive price using the correct VAT rate
- show the VAT information on your invoice - invoices must include your VAT number and display the VAT separately
- show the transaction in your VAT account - a summary of your VAT
- record the amount on your VAT return
There are 3 rates of VAT (standard, reduced and zero-rated). VAT rates can change. You must apply any changes to the rates immediately, from the date they change.
Check the current VAT rates.
When to charge standard rate
You usually charge standard rate of VAT (currently 20%) on most goods and services. Use standard rate unless the goods or services you sell are classed as reduced or zero-rated.
When to charge reduced rate
You charge reduced rate (currently 5%) instead of standard rate on certain goods or services, or if the circumstances of the sale meets certain rules. For example, reduced rate applies to:
- child car seats
- domestic fuel or power
- mobility aids if they’re for someone over 60 and installed in their home
Find a list of reduced rate goods or services.
When to charge zero rate
You charge zero rate on goods and services if you export them, depending on where in the UK you are supplying them from and where they’re going to.
Zero rate means you must still account for and charge VAT (for example, you must include it on your invoices) but the rate you use is 0%.
Charge zero rate on goods you export from:
- Great Britain (England, Wales and Scotland) to somewhere outside the UK
- Northern Ireland to somewhere outside the UK and EU
- goods you supply from Northern Ireland to a VAT registered EU business - you can check if the VAT number is valid
How to calculate prices with and without VAT
You need to work out the total price including VAT (the ‘VAT-inclusive price’) when you sell goods or services.
You might also need to work out how much VAT you’ve paid on goods you bought, for example if reclaiming VAT. You do this by working out what the price of the goods would be without VAT (the VAT-exclusive price).
To work out a price that includes the standard rate of VAT (currently 20%), multiply the price excluding VAT by 1.2.
You’re selling a chair for £60 and need to add 20% VAT to get the price including VAT.
60 x 1.2 = 72
The price including VAT is £72.
To work out a price that includes the reduced rate of VAT (currently 5%), multiply the price excluding VAT by 1.05.
You’re selling a child’s car seat for £200 and need to add 5% VAT to get the price including VAT.
200 x 1.05 = 210
The price including VAT is £210.
To work out a price that excludes the standard rate of VAT (currently 20%) divide the price including VAT by 1.2.
You bought a table and the total price including 20% VAT was £180.
180 ÷ 1.20 = 150
The price excluding VAT is £150. The amount you can claim back is the difference between the two numbers - £30.
To work out a price that excludes the reduced rate of VAT (5%) divide the price including VAT by 1.05.
You bought a stairlift and the total price including 5% VAT was £483.
483 ÷ 1.05 = 460
The price excluding VAT is £460. The amount you can claim back is the difference between the two numbers - £23.