About The VAT Calculator

The VAT Calculator uses the current tax rates from HMRC (Her Majesty's Revenue and Customs) to calculate value added tax information.

What is VAT?

VAT is short for Value Added Tax and is a tax on goods and services provided by businesses in the UK. Businesses have to register for VAT when their annual turnover reaches a certain limit (currently £73,000). Once they have registered for VAT, the businesses have to charge their customers the appropriate VAT on any products they sell. They are also able to claim back any VAT they pay when buying supplies, and they send the difference to the taxman.

VAT is charged at 3 different rates, depending on the product being sold:

Standard rate - 20%
Reduced rate - 5%
Zero rate - 0%

In the June 2010 Emergency Budget, the Chancellor announced that from 4th January 2011 the standard rate of VAT will increase to 20% from 17.5%. Choose 20% in the "VAT Rate" option in the calculator to see how this affected the price of goods.

What are the different rates for?

The standard rate of 20% is the default rate that is applied to all goods and services unless they have been specified as being at a lower rate or exempt. Examples of reduced rate (5%) items are domestic fuels and mobility aids for the elderly. Zero-rated items like food and books have no additional VAT cost, but this is not the same as being VAT-exempt. However, the distinction only affects the businesses selling the goods, not consumers purchasing them.

Do I have to pay VAT?

In general, yes. However, in some cases charities can be exempt from paying VAT on supplies they purchase in conjunction with fund-raising events. Visitors to the UK can often claim back the VAT on purchases they made here when they leave the country.

Where can I read more?

The HMRC website has more information, including details of how to register for VAT, how to charge and pay it if you are a business, and which items attract which VAT rate (and which are exempt).

Why is 0% VAT an option?