VAT basics for consumers

VAT is a tax that you pay when you buy goods and services in the European Union (EU), including the UK. If you have to pay VAT on something, it will normally be included in the price you see. You don't have to pay VAT at all on some goods and services, and sometimes you only pay a reduced rate.

On this page:

When do you pay VAT and how much?

VAT is a tax you pay when you buy goods or services from a VAT-registered business in the EU, including within the UK.

Each EU country has its own rates of VAT. In the UK there are three rates.

Standard rate

You pay VAT on most goods and services in the UK at the standard rate.

The standard rate of VAT is 20% but was 17.5% for the period 1 January 2010 to 3 January 2011.

Reduced rate

In some cases, for example children's car seats and gas and electricity for your home, you pay a reduced rate of 5%.

Zero rate

There are some goods on which you don't pay any VAT, like:

  • basic food items
  • books, newspapers and magazines
  • children's clothes
  • some goods provided in special circumstances - for example, equipment for disabled people

Find out which rates apply to different goods and services

Find out whether you can reclaim VAT on building a new home or converting a building into a home

Find out about paying reduced-rate VAT on energy-saving materials

Find out about paying reduced-rate VAT on equipment and vehicles for disabled people

Find out about paying reduced-rate VAT on mobility aids for older people

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How VAT is worked out

When someone charges you VAT they multiply their selling price by the VAT rate to calculate the amount of VAT to charge. They then add the VAT amount to the net price to give the 'gross' price - the price you pay. The gross price is the price that you, as a consumer, will normally see displayed or advertised.

Prices in retail shops

Prices advertised to the public in ordinary retail shops include VAT. No tax will be added to the price when you pay. This is a legal requirement.

Retail sales

If you pay a retailer in full for something that you either take away or have delivered on or after 4 January, the new 20% will apply.

But if you pay a retailer in full on or after 4 January for something you have already taken or already had delivered before that date, the old 17.5% rate will apply.

If you are a retailer you must clearly show your prices inclusive of VAT. However, following a VAT rate change you will have up to 28 days to adjust your prices. So, from 4 January 2011 to 1 February 2011, you can put up a notice to let your customers know that an adjustment will be made at the till to account for the VAT rate change.

Prices in advertisements, catalogues and price lists

Products advertised in outlets, magazines, on the internet, or shown in catalogues, price lists and other literature may be aimed at the consumer, businesses, or both. If they're only meant for the general public, they'll show you a price including VAT. This is a legal requirement.

If they're aimed at both consumers and businesses, they will usually show a VAT inclusive price, but may also show a price without VAT. The VAT inclusive price must be given equal importance, but read carefully to make absolutely certain you understand what price you'll pay.

Prices aimed only at businesses are usually shown with no VAT included. VAT will be charged on top of the price shown.

VAT on bills and receipts

Most retail prices on bills and receipts include VAT - it is not shown separately. However, some may also show the VAT element as a separate line. This doesn't mean you're being charged extra - it just shows how much tax is included in the price.

Non-retail invoices from VAT-registered suppliers - for example from builders, or painters and decorators who are VAT registered - must show a separate amount for VAT. They must also show the nine-digit VAT Registration Number of the business.

How to check if a VAT number is valid

You can check whether a UK VAT number is valid by following the link below:

Check a UK VAT registration number

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If you suspect a VAT fraud

If you suspect that a firm is avoiding paying VAT, or charging VAT when they aren't VAT registered, you can report them to HMRC by calling the free Customs Hotline. You don't have to give your name or any personal details.

Contact the Customs Hotline

Businesses that may not charge VAT

Businesses with annual sales below a certain threshold - currently £81,000 - don't have to register for VAT, and so they don't have to charge you any VAT on their prices. So, the price you pay for their goods or services may be cheaper than if you bought the same goods or services from a VAT registered supplier.

Find out more about contractors who won't charge VAT if paid in cash

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Getting more help and advice

There is a range of general guidance on VAT in this section of the website. If you can't find what you need, you can contact the VAT Helpline.

Contact the VAT Helpline

If your question is more complex you can email your query to HMRC.

Members of the public - email a VAT question

If you're in business and have a question about VAT there are different postal and email addresses depending upon your enquiry.

Questions about VAT: writing to HMRC to get them answered

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