What is VAT?

VAT stands for Value Added Tax. It's a consumption tax added to the price of goods and services in the UK and many other countries. VAT is charged at each stage of the production and distribution process, but it's ultimately paid by the end consumer.

Key Points about VAT:

• VAT is charged on most goods and services in the UK
• The standard VAT rate in the UK is currently 20%
• Some items have reduced rates (5%) or are zero-rated (0%)
• Businesses must register for VAT if their taxable turnover exceeds the threshold (currently £85,000)

How VAT Works:

When a VAT-registered business buys goods or services, it pays VAT to the supplier (input tax). When it sells goods or services, it charges VAT to the customer (output tax). The business then pays the difference between the output tax and input tax to HMRC.

VAT Rates in the UK:

• Standard rate: 20% (most goods and services)
• Reduced rate: 5% (some goods and services, like children's car seats and home energy)
• Zero rate: 0% (most food and children's clothes)

Understanding VAT is crucial for businesses and consumers alike. Use our VAT calculator to help you calculate VAT amounts and total prices including VAT.

More details can be found here:
http://www.hmrc.gov.uk/VAT/forms-rates/rates/goods-services.htm