The VAT or Value Added Tax can be termed as the collected tax on the sale of each service or goods across the UK. This is basically a type of consumption tax which is always charged on the goods which people buy online. The VAT is also considered as the indirect tax as it is collected on behalf of the Government of the UK by owners of businesses.

VAT in the UK

The Current VAT Rates in the UK

In the UK standard rate for Value Added Tax is about 20 percent of the total purchased goods or services. 20 percent rate is charged on the maximum of the purchases, but there are few other types of VAT as well which must be known. However, the laws and regulations of the UK suggest that the VAT rate must be lower than 15 percent.

There is a type of reduced VAT which is charged on the products such as children’s car seats, energy-saving products, and sanitary products, etc. The rate of VAT for these products is about 5 percent only.

There is 0 percent VAT as well which is applicable to goods e.g. children clothes, newspapers, books, and food items, etc. Even though such products don’t possess any VAT rate, however the sale of these goods must also be recorded and its VAT return reports must be submitted.

There are few items that are entirely exempted from the VAT such as property and financial transactions, and postage stamps, etc. These services and items may or may not be reported in VAT returns.

The Changes in VAT Rates

Value Added Tax was first introduced in the year 1973. The VAT was introduced for replacing the purchase tax. The purchase tax was imposed at the time of production of the services or goods even if these were not sold or distributed. However, the purchase rate was different for different types of services and goods.

With the course of time rates of VAT have been changing with each changing Government which opts to lower or raise its rate depending on their goals and priorities. The rates for VAT across the UK since its implementation are mentioned in the table below.

S. No Year VAT Rates (%)
1 1973-1974 10
2 1974-1979 8
3 1979-1991 15
4 1991-2008 17.5
5 2008-2009 15
6 2009-2011 17.5
7 2011-Present 20

A buyer or seller must be aware that the VAT rate can change anytime. Therefore, one should keep updated with the latest VAT rates for ensuring the accounts and invoices accurate all the time.

Eligibility for VAT

The businesses whose yearly turnover is over £85,000 must-have VAT registration. Such businesses are bound to pay VAT on each sale of their services and goods. However, the businesses having turnover less than £85,000 may also opt for VAT registration voluntarily. The businesses are charging their customers for VAT and in return pay it to Government through their VAT return.

Method of Paying VAT

The VAT payments can be done through a number of ways.

  1. Through CHAPS by filling out a form online.
  2. Through the online payment method.
  3. BACS.
  4. Credit or Debit Cards.
  5. Bank Transfer.
  6. Through VAT schemes (Standard Orders).
  7. Direct Debit.