What is VAT?

Value Added Tax (VAT) is a consumption tax levied on most goods and services sold in the UK. The standard rate is 20%, with a reduced rate of 5% for items such as domestic energy and children's car seats, and a zero rate for essentials like food and children's clothing. Businesses with taxable turnover above the registration threshold (£90,000 from April 2024) must register for VAT with HMRC, charge it on sales, and submit periodic returns. Registered businesses can also reclaim VAT paid on eligible purchases.