VAT Rates
| Rate | Applies to |
|---|---|
| Standard Rate: 20% | Most goods and services |
| Reduced Rate: 5% | Domestic energy, children’s car seats, certain renovations, mobility aids |
| Zero Rate: 0% | Most food, children’s clothing, books, newspapers, public transport, new residential construction |
| Exempt | Insurance, financial services, education, healthcare, postal services |
VAT Registration Thresholds
- Compulsory registration threshold: £90,000 taxable turnover (rolling 12 months)
- Deregistration threshold: £88,000
- Threshold increased from £85,000 on 1 April 2024 and remains at £90,000 for 2026/27
Making Tax Digital for VAT
MTD for VAT is mandatory for all VAT-registered businesses regardless of turnover. You must:
- Keep digital VAT records
- File VAT returns using MTD-compatible software
- Maintain a digital audit trail from source transaction to VAT return
VAT Flat Rate Scheme
Available to businesses with taxable turnover below £150,000. Flat rates vary by sector (typically 4%–14.5%). Contact us to assess whether the Flat Rate Scheme benefits your business.
Annual Accounting Scheme
Available to businesses with taxable turnover below £1.35 million. One VAT return per year, with interim payments throughout the year.
Cash Accounting Scheme
Available to businesses with taxable turnover below £1.35 million. VAT is accounted for on the basis of cash received/paid rather than invoices issued/received — useful for businesses with slow-paying customers.
Private School VAT — From January 2025
From 1 January 2025, independent (private) school fees became subject to 20% standard rate VAT. This ended the previous VAT exemption for private education.
