VAT (Value Added Tax) is a consumption tax of 20% added to most goods and services in the UK. Businesses with turnover over £90,000 must register and charge it to customers.

What is the VAT registration threshold UK 2026?

£90,000 in any rolling 12-month period. You must register within 30 days of exceeding this threshold.

What is zero-rated VAT?

Zero-rated means VAT applies at 0% — businesses still charge VAT but at a zero rate. This includes most food children's clothing and books. It differs from exempt which means VAT does not apply at all.

Tax & HMRC ⏱ 2 min read 📅 Updated Apr 2026

What Is VAT UK? Value Added Tax Explained 2026

Chandraketu Tripathi

Finance Editor, Kaeltripton

Published 3 Apr 2026

Last reviewed 12 Apr 2026

✓ Fact-checked

What Is VAT UK? Value Added Tax Explained 2026

UK Tax Guide — April 2026

VAT (Value Added Tax) is a consumption tax added to most goods and services sold in the UK. Businesses registered for VAT charge it to their customers collect it and pay it to HMRC. As a consumer you pay VAT as part of the price of most things you buy.

UK VAT Rates 2026

Rate	Percentage	What It Applies To
Standard rate	20%	Most goods and services — default rate
Reduced rate	5%	Energy saving materials children's car seats
Zero rate	0%	Food most children's clothing books newspapers
Exempt	N/A	Financial services insurance education healthcare

The VAT Registration Threshold 2026

Businesses must register for VAT when their taxable turnover exceeds £90,000 in any rolling 12-month period. This threshold has been frozen since 2017. Once registered you must charge VAT to customers and submit quarterly VAT returns.

How VAT Works — A Simple Example

Stage	Price	VAT at 20%	Total
Manufacturer sells to wholesaler	£100	£20	£120
Wholesaler sells to retailer	£150	£30	£180
Retailer sells to consumer	£200	£40	£240
Consumer pays	—	—	£240

Each business in the chain only pays VAT on the value they add — they reclaim the VAT they paid on purchases and pay the difference to HMRC. The final consumer bears the full cost.

Do I Need to Register for VAT?

You must register if turnover exceeds £90,000 in 12 months
You can register voluntarily below the threshold — useful if you have VAT-registered customers
Once registered you must charge VAT issue VAT invoices and submit quarterly returns
You can reclaim VAT on business purchases — significant saving for B2B businesses

VAT Schemes for Small Businesses

Scheme	Best For	Benefit
Flat Rate Scheme	Businesses with low VAT on purchases	Pay fixed % of turnover — simpler accounting
Cash Accounting	Businesses with slow-paying customers	Pay VAT when you receive payment not when invoiced
Annual Accounting	Those wanting to reduce admin	One VAT return per year instead of four

Bottom line: If your turnover is approaching £90,000 register for VAT now — being caught unregistered means paying backdated VAT yourself. The Flat Rate Scheme can save small businesses significant money if your actual VAT rate is lower than your flat rate percentage. Always get accountancy advice before registering.

By Chandraketu Tripathi · Updated April 2026 · kaeltripton.com

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Chandraketu Tripathi

Finance Editor · Kaeltripton.com

22 years in global marketing and finance publishing. Specialist in UK personal finance, insurance, tax and consumer money guides.