In this section:
- VAT basics for consumers
- Reclaim VAT on a new home or converting a building into a home
- Paying reduced rate VAT on energy-saving materials
- Businesses who won’t charge VAT if paid in cash
- How VAT applies if you import or export a personal vehicle
- Equipment and vehicles for disabled people might be free of VAT
- Reduced-rate VAT on mobility aids for older people
- VAT refunds for visitors to the UK
- Tax on goods ordered from or bought abroad
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 is 15 per cent. It will increase to 17.5 per cent on 1 January 2010.
Reduced rate
In some cases, for example children's car seats and gas and electricity for your home, you pay a reduced rate of five per cent.
Zero rate
There are some goods on which you don't pay any VAT, like:
- most food items
- books, newspapers and magazines
- children's clothes
- special exempt items - 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
How VAT is worked out
When someone charges you VAT they multiply the original 'net' price of the item or service 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.
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
To check whether a UK VAT number is valid you can contact HM Revenue & Customs (HMRC).
You can also check European Union VAT numbers online.
Check an EU VAT number on the European Commission website
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. You don't have to give your name or any personal details.
The Customs Hotline, Tel 0800 595 000, open 24 hours, seven days a week.
Businesses that may not charge VAT
Businesses with annual sales below a certain threshold - currently £68,000 - 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
