If you sell goods or services in the UK, VAT (Value Added Tax) is the consumption tax you'll most often deal with. This guide covers the 2026 rates, the £90,000 registration threshold, the Making Tax Digital obligations, and how Brexit changed cross-border VAT for UK businesses.
UK VAT rates in 2026
The UK applies three VAT rates:
| Rate | Applies to | | ---- | ---------- | | 20% (standard) | Most goods and services: professional fees, software, B2B services, alcoholic drinks, electronics | | 5% (reduced) | Domestic gas and electricity, children's car seats, mobility aids for the elderly, some renovation works | | 0% (zero-rated) | Most food, books and printed magazines, children's clothing, public transport, exports outside the UK |
There's also a VAT-exempt category — different from zero-rated — covering financial services, insurance, education, healthcare and postal services. Exempt sales do not count towards the registration threshold; zero-rated sales do.
The £90,000 registration threshold
You must register for VAT with HMRC if:
- Your taxable turnover (excluding VAT-exempt sales) exceeds £90,000 over any rolling 12-month period, or
- You expect your turnover to exceed £90,000 in the next 30 days alone.
Once registered, you must:
- Charge VAT on all taxable sales.
- Submit VAT returns (usually quarterly) via Making Tax Digital software.
- Keep digital VAT records for at least 6 years.
- Display your VAT number on invoices.
Voluntary registration is allowed below £90,000 — useful if most of your customers are VAT-registered businesses (they reclaim the VAT) or if you want to recover VAT on your own purchases.
Mandatory information on a UK VAT invoice
A full VAT invoice must include:
- A unique sequential invoice number
- Issue date and (if different) tax point (date of supply)
- Your name, address and VAT number
- Customer's name and address (and VAT number for B2B EU)
- Description of goods or services
- Quantity and unit price (excl. VAT)
- VAT rate applied per line
- Total excl. VAT, total VAT, total incl. VAT
- Discounts if applicable
For sales below £250 (incl. VAT), a simplified invoice with reduced details is allowed for retail.
Making Tax Digital (MTD)
Since April 2022, all VAT-registered businesses must comply with Making Tax Digital — even those below the threshold who registered voluntarily. MTD requires:
- Keeping digital records of sales and purchases.
- Submitting VAT returns via MTD-compatible software (no more manual entry on the HMRC portal).
- Maintaining a digital link between source data and the VAT return (no copy-paste).
Approved software includes Xero, QuickBooks, Sage, FreeAgent, and dozens of others. Spreadsheets are allowed only with a "bridging" tool that transmits data digitally to HMRC.
Post-Brexit: EU reverse charge and exports
Since January 2021, the UK is no longer in the EU VAT area. This changes how you invoice EU customers:
Selling services to EU businesses (B2B)
The reverse charge mechanism still applies for most services: you invoice without UK VAT, and the EU customer self-accounts for VAT in their country.
Required mention on the invoice: "Reverse charge: VAT to be accounted for by the recipient (Article 196 of EU Council Directive 2006/112/EC)".
You'll need the customer's EU VAT number (verifiable via VIES).
Selling goods to EU customers
Goods are now exports (zero-rated VAT in the UK). EU customs procedures and import VAT apply on arrival. Most B2C sales to EU consumers below €150 fall under the IOSS (Import One-Stop Shop) regime.
Selling to non-EU countries
Treated as exports — zero-rated for UK VAT. Keep proof of export (shipping documents, customs declarations) for 6 years.
Common pitfalls
- Forgetting the time-of-supply rule: VAT becomes due at the earlier of (a) invoice date, (b) payment date or (c) date of supply. Get the tax point right.
- Charging VAT before registration: illegal. You must register before adding VAT to invoices.
- Mixing up zero-rated and exempt: zero-rated sales count towards the £90,000 threshold; exempt sales don't.
- Missing the reverse charge mention on EU B2B services: triggers double taxation risk.
- Late VAT returns: HMRC penalties start at 2% surcharge and escalate quickly.
VAT calculation cheat-sheet
| From | To | Formula | | ---- | -- | ------- | | Net (excl. VAT) | Gross (incl. VAT) | Net × 1.20 (for 20%) | | Gross | Net | Gross / 1.20 | | Gross | VAT amount | Gross × (20 / 120) = Gross / 6 |
For 5% reduced rate, replace 1.20 with 1.05 and 20 / 120 with 5 / 105.
Issue compliant UK VAT invoices
Invoice Creator generates UK VAT-compliant invoices with all mandatory fields, automatic VAT calculation per line, and the correct reverse-charge mention for EU B2B services. The PDF can be saved alongside your MTD records.
For more, see our professional invoice templates or our guide on freelancer invoicing in the UK.